The reasons an investor will seek a hard money lender are multiple and various. An investor that chooses hard money loans more times than not, usually has less that perfect credit. Because of their credit rating, they are not able to obtain a conventional loan through a bank.
Investors with less than ideal credit are not the only ones seeking hard money loans though. An established investor with solid credit and reputation may choose this method of obtaining money too. This investor may need fast cash in order to purchase a product, in this case, a piece of real estate because of competition of other investors. First one with the best cash offer usually gets the deal.
In real estate, by obtaining a hard money loan, the investor is able to finance not only the purchase but any repairs and upgrades as well any additional cost that may come about unexpectedly. Real estate investors also are not favorable candidates with the banking industry. They don’t have the usual income statements that a steady job provides which is proof they can repay the loan.
While the process of hard money lending is unique, those that have the substantial cash flow to offer the loan and the real estate investors that seek these types of loans have a common goal. They both want a quick turn around for quick cash.
Hard money lenders see that their money is secured by the real estate and there is little risk involved. Hard money lenders put trust and faith with their money that the investor has shopped the property and made a good decision. By using the property purchased by the money loaned, the equity is already available. There is no waiting for the equity to build. A real estate investment of this time has steady return and steady monthly cash flow which appeals to many people with money to lend.
The real estate investors see having this type of loan available allows them to pay cash on the spot for a great deal. All the expenses associated with this purchase are paid for by other’s money and they will still reap the rewards of making quick cash. Hard money lending can be a satisfying way to make quick cash for both parties.
What are the business strategies should be known for becoming the Hard Money Lender?
ReplyDeleteHard money lenders should be ready to earn great returns on their investments, but often times those returns won't be realized for 6 months to a year. The most important business strategy however is to make sure that the private money you are lending is secured and insured. Feel free to search our blog for information about title insurance, hazard insurance and what hard money lenders should be doing to protect themselves in this economy!
ReplyDelete