Top 5 Reasons to Use a Hard Money Lender
For real estate transactions and investment loans. Working with a variety of lenders, borrowers, brokers, real estate professionals, appraisers, accountants, attorneys and industry experts, their group of experienced specialists strives to help people with private money lending during this downturned economy.
What are the top five reasons to consider using hard money lending in today’s market?
- Money to Lend – Private money lenders have money in the bank, ready for their next investments.
- Quick Closings – Instead of having loans go through a loan officer and then to a loan underwriting team that takes forever to approve paperwork, ultimately resulting in them not accepting high-risk loan investments, private money lenders can quickly close on a loan, most times averaging three weeks or less.
- Income – Instead of over-analyzing cash flow and income, private lenders look at the borrower’s ability to repay the loan. Often times this is considerably easier, as some commercial loans do not necessarily pencil based on projected cash flow. This means that more private lenders are willing to provide loans on distressed and vacant properties, allowing investors enough time to carry properties until they are renovated and in saleable condition.
- Instant Pre-Approval – Because private lenders look at a borrower’s strengths and his/her ability to repay a loan, they can provide faster pre-approval and pre-qualification letters that accompany purchase agreements. This means less hassle at the banks and no time-consuming loan application processes.
- Lend on After-Repair Values – Instead of looking at loans as a traditional financial institution, hard money lenders analyze what the property will potentially be worth after the borrower fixes it up. This means they typically fund more initially, allowing the borrower cash to rehabilitate and resell the investment property for full profit value.
Ultimately, hard money lenders are not afraid of taking risks. Many traditional lending institutions only lend money to people who are well qualified according to their strict standards. Instead hard money lenders look at each individual real estate transaction and the borrower’s specific circumstances, making individual decisions instead of simply following blanket rules and regulations.
While banks typically borrow funds from the Federal Reserve, lend those funds to the government and then pocket the difference between the two, private lenders are not afforded this luxury. If a private lender is not lending money, they’re not making money, which is unacceptable in this line of business.
While typically hard money lenders charge higher interest rates than the going APR, they are more open to lending to investors that may be deemed as “risky” by standard lending institutions. Without hard money lenders, the world of real estate investing would be a shrinking commodity, one with far more foreclosures and rehab structures flooding the open market.