Hard money loans represent great opportunity for investors because they are easy to obtain. At times, the lender does not need income verification. Surely, the risk does lead to higher interest rates. It is expected that interest rates would be higher on a hard money loan. After all, you can get one regardless of your credit history.
It is not surprising that this request might be a bit more costly. It takes a lot more jeopardy for an investor to provide towards this kind of loan.
Other belongings can be added to the loan, making it more appealing for a hard money lender.
A hard money lender finds a value ratio more eye-catching. The loan cannot amount to more than 65% of the value of real estate.
Tennessee and New Jersey currently prevent the practice of hard money loans. Nevertheless, this type of loan is considered amongst other regions and around the nation. Businesses don’t receive much protection under hard money loans. It will be a great idea for businesses to place their confidence in another type of loan.
One of the very best ways to use hard money loans is as “bridge financing” for short sale investment transactions. The way that works is as follows: A real estate investor will find a good short sale opportunity and simultaneously will identify a retail buyer for the property in question. Due to “title seasoning” and the policies of various lenders, it will be impossible for the investor to sell the property directly to the retail buyer and still capture the profit available in the transaction.
For that reason, real estate investors frequently use hard money lenders to fund “temporary acquisitions” so that they can purchase the short-sold property and then resell the property to the retail buyer. This is frequently more acceptable to a buyer’s lender and will make it possible for the transaction to be approved.
Hard money loans are also very frequently used for the funding of rehab/rebuild projects. For example, many real estate investors purchase severely damaged and/or fire-damaged properties for 25 cents or less on the dollar, and will fund the purchase and the reconstruction using a hard money loan.
As you can see, hard money loans can be a valuable tool in a real estate investor’s arsenal.