As a real estate investor, you’ve likely heard the term ‘hard money loans.’ You may be wondering how they can fit into your investment strategy. You’re in the right place. We’ve designed this guide to help you understand how you can leverage hard money loans to speed up your real estate deals.
How to Leverage Hard Money Loans for Faster Real Estate Deals
This guide explains:
- Understanding hard money loans
- Benefits of hard money loans for investors
- How to leverage hard money loans for real estate deals
- How to apply for a hard money loan
Here’s a closer look at each.
Understanding Hard Money Loans
Hard money loans are short-term, interest-only loans typically used by investors who need quick funding. They are backed by the property’s value, not the borrower’s creditworthiness.
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Benefits of Hard Money Loans for Investors
As an investor, you’ll find hard money loans can offer several advantages. Their speed and flexibility are unmatched, enabling you to close deals quickly. They’re also an excellent option if your credit history is less than stellar.
How to Leverage Hard Money Loans for Real Estate Deals
Leveraging hard money loans for real estate deals can be an effective strategy for investors. These loans can fund fix-and-flip projects, rental properties, or land purchases. After you secure a hard money loan, you can quickly close on a property, rehab it, and then sell or rent it for profit.
How to Apply for a Hard Money Loan
Applying for a hard money loan is simple. Reach out to a reputable hard money lender, present your deal, and they’ll guide you through the rest of the process.
Related: What do you need to take out a hard money loan this year?
Why Do Many REIs Prefer Hard Money Loans to Conventional Loans?
Many real estate investors prefer hard money loans to conventional loans due to several key advantages, which the following sections outline.
Hard money loans are typically approved and funded much quicker than conventional loans. This speed can be critical for investors, particularly in competitive markets where they need to move fast. After you identify a promising investment, a hard money loan can help you secure it quickly.
Unlike conventional loans, which have stringent and inflexible rules, hard money loans are often more flexible. Hard money lenders, usually being private institutions or individuals, make decisions based on perceived risk and return rather than strictly following a uniform policy. This flexibility allows them to work with investors to create a loan that suits their unique needs.
Property Value Over Credit History
Hard money loans are primarily asset-based, meaning the focus is on the value of the property and its potential to generate profits. Therefore, a less-than-perfect credit score isn’t as significant of an obstacle as it might be with conventional loans.
Access to More Deals
Conventional loans often limit the number of loans an investor can have. But with hard money loans, an investor can take on multiple projects simultaneously, increasing the potential for profits.
Related: 7 advantages hard money loans have over traditional bank loans
Ideal for Rehab and Resale
Hard money loans are especially useful for “fix and flip” projects. They allow investors to purchase a property, cover the cost of renovations, and then quickly sell the property for a profit. Once the property is sold, the loan is paid off.
Overall, the speed, flexibility, and focus on asset value over credit history make hard money loans a preferred choice for many real estate investors. They can be a valuable resource, particularly for those working on time-sensitive projects or those who might not qualify for conventional financing options.
FAQ About Hard Money Loans
Check out these commonly asked questions about hard money loans. If you don’t see the answers here, please call our office, and we’ll get you the information you need.
What is the interest rate on hard money loans?
Interest rates on hard money loans vary. The best way to find out how much you’d pay in interest is to call our office and tell us a little bit about the home you want to buy.
How quickly can I get a hard money loan?
You can get a hard money loan in as little as a week, which is significantly faster than a traditional bank loan.
Can I get a hard money loan with bad credit?
Yes, it’s possible to get a hard money loan with bad credit, as these loans are primarily based on the property’s value and not your credit score. Remember, though, that these loans are primarily for real estate investors.
Hard money loans can be a powerful tool in your investor toolkit, speeding up your deals and providing flexibility that traditional loans can’t match. They offer you the chance to grow your real estate portfolio quickly and successfully.
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!