Most traditional lending institutions make the average real estate investor navigate through a seemingly endless amount of jumping through hoops only to turn down the loan in the end. Even creditworthy investors who have seemingly straightforward real estate deals with good cash flow and excellent ROI are routinely turned down. Fortunately, there is an alternative for the knowledgeable and experienced real estate developer, namely, hard money loans.
The Value of Hard Money Loans
Hard money loans are an excellent choice for investors with non-traditional deals. Individuals and companies with hard money to lend offer several decided advantages over banks and other traditional financial institutions.
In most cases, hard money lenders have been in business for themselves or intimately involved in running a business. For this reason, they understand the business in general, and can grasp the particulars of an unusual but potentially lucrative real estate deal. In addition, their knowledge can actually aid the borrower in solidifying the details, and therefore, make the deal that much more attractive.
Similarly, those who make hard money loans understand that all deals will not fit into a neat and prescribed format. In fact, they realize that the best deals are probably taking advantage of a unique situation and can appreciate the borrowers business savvy. In other words, hard money lenders are not tied to a model and, in may instances, are intrigued by a new and potentially lucrative investment strategy.
Hard money loans do not have to undergo the tedious and time-consuming process that most mortgages do. Instead, the money or loan is approved by the very person who has the money. Since a single person is usually making the decision, loan approvals are timely and any other needed responses are similarly swift.
Hard money loans do have one aspect in common with traditional, bank-financed loans; they are investigated, documented and secured in the same manner. Title searches are done, escrow accounts are established and all of the other legal details are observed. Both parties in a real estate deal with hard money loans can rest assured that their interests are securely protected to the fullest extent of the law.