Hard money lenders are private people or companies that use their own money or lines of credit to finance real estate. These lenders are often familiar with real estate. They have often built lending companies as well as purchased, sold and exchanged many forms of real estate throughout their business life. Because of a hard money lenders extended knowledge their prices, interest and other costs are set. Their interest rates usually run about 10-18% with additional costs (called points) around 3-8% of the loan amount being lent to you. These large costs may deter first time and new investors from using hard money lenders for their real estate investing businesses. However, here are three large reasons you should consider using hard money financing in your own real estate investing businesses:
You have likely heard “cash is king”. In no other business is this truer than in real estate.
Think: if you were selling a house and you received two offers. One was cash and the other was traditional financing. With all other items being equal you would be more likely to accept the cash offer. Cash gives strength and power to your offers. Hard money financing is often considered as “cash” financing and gives you the same strength, power and value as actual cash.
One of the similarities and benefits of cash and hard money financing is the speed.
If you were at a grocery store to purchase a candy bar and purchased the treat with cash it would only take you minutes to purchase the candy. Similarly, real estate purchased with cash or hard money financing can be completed very quickly. Unlike the candy bar real estate purchases have a need to clear title. However, after a cleared title real estate transactions can be completed in days. This speed can also give large strength to your offers.
Hard money lenders do not have the same lending requirements as a bank. As you may know or have experienced: banks often require down payments, good credit scores, years on a job and sizable bank statements. This is not likely the case for hard money lenders; instead, their evaluations are usually on the property and the equity you are purchasing as a part of their property review rather than on you.
Easy qualifying allows more investors like you and I to purchase.
Reading these easy steps, you can see the value of the financing offered by hard money lenders. To add to the benefits of these types of lenders if you know their costs you can deduct the costs from your offer formulas so that there is little to no change to the profits you could make in real estate transactions. Consider using hard money lenders to finance your next real estate transactions.