A huge proportion of Real estate investors prefer seeking financial support from hard money lenders than their local-bank loans since hard money lenders have been promisingly offering them cash within a short period of time. This article centers on investing with hard money lenders.

Investing with hard money lenders is quite easier than trying to acquire financial support from traditional lenders because hard money lenders are time-saving and efficient especially when one needs cash urgently. A borrower looks for the hard money lender in their local area and chooses whether they want to acquire their services or not.  

An investor should do good research and follow up on different hard money lenders at their local area and pick the one with the most favorable deals amongst them all.  

Financing Sources for an Investor   

  • A home Equity credit line  
  • Private money lenders 
  • Hard money lenders 
  • Homeowners ready to finance the forthcoming property purchase 
  • A partner  

Hard Money Lenders 

These are semi-institutional money lenders who play the role of financing real estate investors. Hard money lenders help investors secure deals by offering them financial support thus enough cash to make a breakthrough in the respective investment. 

They offer short term finance for Real estate investors who need the cash for property purchase or for construction costs. Unlike the traditional lenders, hard money lenders work under very strict loan terms with fixed interest rates and principal payments at the end of the month or a balloon payment. 

Borrowers have to repay the loan back in time with an interest rate of 11-15% and an additional 1 to 3% of subsequent principal payment.  

Hard money lenders use the investor’s property as collateral for the loan. The property value varies from one borrower to another depending on the amount of cash one is in need of at the moment.  Rather than looking at the borrower’s credit history, lenders have full attention to the asset’s value instead.  

Therefore, a borrower should check, confirm, and document proof of their property’s value before approaching your respective lender for a certain amount of cash. Borrowers who meet the set terms and conditions for receiving a hard money loan will receive the cash within a week or two. 

The borrower should work towards repaying the granted loan in time to avoid defaulting. Faiĺure to make your payment on time can lead to loss of your property since the lender will be forced to sell your real estate property to repay your outstanding loan.  

When Investors Should Use Hard Money Loans 

Hard money lenders offer financial support to investors in the form of hard money loans whereby the borrowers have to use a tangible asset as security. However, many hard money lenders are typically specialized in certain types of loan offers i.e. Land loans, construction loans, and rehab projects finance as well.  

Investing with hard money lenders helps investors with credit issues (at traditional banks) to access cash easily from lenders as long as you meet the set criteria. These loans help investors in real estate acquisitions and property construction as well. All you need to get the hard money loan is property equally valuable to the amount of cash you are applying for.  

Finding Hard Money Lenders -Investing With Hard Money Lenders 

Most Real estate investors still don’t know how they can access or find a hard money lender in their current location today. It is advisable to consider the hard money lenders in your local area since no hard money lenders are really interested in financing investors out of their local area. Hereby, follow these simple steps to find a hard money lender to fund your investment today: 

Meet up meetings REIA 

Hard money lenders often attend and even give speeches at real estate events in their local area. You can find them here and interact with them during the course. If not, you can ask for fellow investors to refer you to real estate agents that they know.  

Traditional lenders 

You can go to the mortgage brokers in your local area to give you a referral to a hard money lender they know since they would have most probably interacted. Realtors and mortgage brokers can direct you to a hard money lender that you could work with. 

Search ‘hard money lender’ on Google 

You can search for lenders online on your search engine and filter them to your location. Check them out fully to know about their lending history and their reputation. 

Advantages and Disadvantages of Hard Money Loans 

I believe that this form of lending is the most favorable one for Real estate investors and other borrowers who are in need of capital cash for their forthcoming project thus investing with hard money lenders to obtain the amount of cash. Some investors might decide to work with hard money lenders due to loan application rejection by traditional lenders. 

Advantages of hard money lending 

  • It’s time-saving since the lender should grant the money to their borrower within the first 7-14 days after making your application. 
  • Hard money lenders give borrowers a chance to negotiate the set loan terms in their favor 
  • This form of lending is convenient since it accommodates the borrower’s needs in no time. The investors are granted the money shortly after the application, with no intermediaries involved. 

Disadvantages of hard money lending 

  • High costs 
  • The convenience brought about by hard money lenders when offering loans is totally unmatched, a win for the borrowers! However, hard money lenders are known to charge high-interest levels and other additional fees as well as closing costs as well.
  • Short loan length 

Investing With Hard Money Lenders – Conclusion

Lastly, hard money loans are typically short term since they can last 6-18 months for full repayment to be done. The investor should make sure the loan repayment is done on time to improve their loan terms with the current lender when investing with hard money lenders. Going contrary to the terms might force the lender to take a legal step against their borrower.