If you’re looking to purchase a rental property, one of the most important things you’ll need to do is find a good hard money lender. This guide explains what to look for in a hard money lender and provides tips on how to find the best one for your needs.
What is a Hard Money Loan, and Why Would You Use One for a Rental Property Purchase?
A hard money loan is a type of short-term financing secured by real estate. Hard money loans are typically used by investors to purchase and rehab properties, but they can also be used to finance the purchase of a rental property.
Hard money loans are usually issued by private lenders. These lenders specialize in lending to investors, and they are often more flexible than traditional lenders when it comes to underwriting and loan terms. Hard money loans are typically faster and easier to get than traditional bank loans, but they usually come with higher interest rates and fees.
How to Find the Best Hard Money Lender for Your Needs
There are a few things you should keep in mind when you’re looking for a hard money lender for your rental property purchase:
- What are the interest rates and fees?
- What is the loan-to-value ratio (LTV)?
- How long is the loan term?
- What is the prepayment penalty?
- Does the lender require personal guarantees?
- Does the lender require a balloon payment?
- Does the lender offer a line of credit?
- What other terms are there that I should be aware of?
After you’ve considered these factors, you can start to narrow down your list of potential lenders.
What to Look for in a Hard Money Lender
When you’re looking for a hard money lender, there are a few things you should look for:
- Flexibility: A good hard money lender will be flexible in terms of loan amount, interest rate, and fees.
- Fast approval: You should be able to get approved for a loan quickly and without a lot of hassle.
- Good customer service: The lender should have good customer service and be easy to work with.
- Competitive rates: The interest rates and fees should be competitive.
Tips on How to Work With a Hard Money Lender
After you’ve found a few potential hard money lenders, it’s time to start working with them. Here are a few tips on how to do that:
- Get everything in writing: Make sure you get all the terms of the loan in writing before you agree to anything. This includes the interest rate, fees, repayment schedule, and any other important details.
- Read the fine print: Be sure to read all the fine print before you sign anything. You should know exactly what you’re agreeing to.
- Negotiate: Don’t be afraid to negotiate with the lender on terms such as interest rate, fees, and repayment schedule. It never hurts to try!
FAQs About Hard Money Loans and Rental Properties
Q: Can I use a hard money loan to finance the purchase of a rental property?
A: Yes, you can use a hard money loan to finance the purchase of a rental property.
Q: What are the interest rates and fees associated with hard money loans?
A: Interest rates and fees vary from lender to lender. Be sure to shop around and compare rates before you decide on a loan.
Q: How long does it take to get approved for a hard money loan?
A: Approval times vary from lender to lender, but you should be able to get approved quickly and without a lot of hassle.
Q: Does the lender require personal guarantees?
A: Some lenders may require personal guarantees, but not all of them do.
Q: Does the lender offer a line of credit?
A: Some lenders may offer a line of credit, but not all of them do.
Q: What other terms should I be aware of?
A: Be sure to read all the fine print before you sign anything. You should know exactly what you’re agreeing to.
Related: 5 hidden costs of being a landlord
Do You Need a Hard Money Loan?
Paces Funding is the top hard money lender in Georgia, North Carolina, South Carolina and Tennessee. Apply for a hard money loan here or click through our site to find out how we can help you now!