Why Use a Hard Money Loan to Buy a Distressed Property?
If you’re like many people, you know that financing a distressed property can be tough – that is, unless you use a hard money lender. Here’s what you need to know.
Why Use a Hard Money Loan to Buy a Distressed Property?
Conventional lenders often can’t approve investors quickly enough to pounce on great deals, and that’s true whether you’re buying a distressed property or any other property. This leads to many investors working with hard money lenders to buy these – and other – properties. But there are other reasons people use hard money to buy distressed properties, too.
Generally, lenders are in the business of making money. They don’t want to take unnecessary risks, and often, distressed properties pose a financial risk. That’s because unexpected problems can turn up, and those problems often cost a significant amount of money to fix. If someone borrows against a home’s value through a conventional lender, they may not have the cash left over to make good on the loan. That means lenders are less likely to approve these types of financing arrangements.
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Hard money lenders see things differently. They can typically fund loans in a matter of days, and they often lend based on a property’s after-repair value, or ARV. That’s because hard money lenders understand the nature of real estate investing and are willing to let you do what you need to do to fix and flip a property for a profit.
Do You Need a Hard Money Loan?
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