If you're a real estate investor, working with a hard money lender makes a lot of sense. The many benefits of using hard money loans mean that, despite their name, they can actually make things quite a bit easier for you.
Easier to get
The application process for a hard money loan is significantly easier than for a traditional loan. This is because of the way hard money loans are structured: instead of looking at your credit to analyze your ability to pay the loan back, hard money lenders estimate the value of the investment and base the decision to lend or not on the expected return on investment of the property. You still have to apply and qualify for the loan, as well as agree to the terms, but the overall process is less stringent and takes less time.
Hard money loans are more open-ended in nature, so you can tailor them to the particular needs of the project. This includes varying the amount of the loan based on the property and funding any renovations or construction that the property needs. This increased flexibility, combined with hard money loans being easier to qualify for, allows you to take advantage of opportunities that would have passed you buy had you not worked with a hard money lender.
Hard money loans are faster, easier, and less restrictive, but more situation-dependent. The higher the expected profit-to-loan ratio, the more likely a hard money lender is to agree to the loan. So what are the ideal times to go with a hard money loan? Simply put, whenever the opportunity looks unusually promising. Examples include:
Foreclosures or short sales
Properties needing significant renovations
Unique opportunities (such as a discounted payoff)
Because of the structure of hard money loans, they are beneficial for opportunities that have exceptionally high profit potential or that are particularly time sensitive. If you use hard money loans properly, focusing on the above situations, you will be able to take advantage of all of the benefits working with a hard money lender has to offer.
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