For those borrowers new to hard money lending, there are increasingly more lenders springing up eager to capture your business. While the process of obtaining a hard money loan is neither complex nor difficult to come by, you do want to educate and prepare yourself so that when you need to pull the trigger on getting your hard money loan, you can act swiftly. Here are some simple tips to help you out.
The real estate market in the first quarter of 2014 showed certain resilience as the economic woes of the United States continued. The average selling price of single family homes remained stable while the multifamily market made some steady if meager gains. Here are a few lessons we learned in this market while we waited for the real estate market to truly recover.
To the inexperienced investor, hard money borrowing may seem like a most unusual and daunting way to find funding for a real estate project. On the other hand, more experienced investors understand that hard money borrowing actually offers some significant benefits to anyone looking to fund a single/multi-family or apartment deal. Here are the most important benefits:
The nation's economy has always been closely linked to the health of the real estate market; as a result, when the real estate market is booming, so is America's financial state. This symbiotic relationship stems from the influx of cash that investors spend on real estate investments. Fortunately, the investor's measures prove to be as advantageous for the economy as it is for the investor.
Finding the right real estate deal may seem like a most daunting task to an inexperienced investor but more seasoned ones know that there is an excellent alternative to traditional lending institutions – private or “hard” money. In fact, hard money offers some distinctive advantages to the funds provided by banks, savings & loans, and other traditional lending institutions. Here are just three:
The most advantageous aspect of hard money loans is their versatility, since the loans are made by accredited investors – who make decisions about their money on their own - there is no need to jump through hoops of traditional lending institutions with their subjective loan criteria and their loan approval boards. Instead, if a lender and borrower can agree on terms, the deal can be consummated in a legally binding and very secure way.
Hard money lenders offer quick loans on hard to finance properties. Not unreasonably, though, they charge for their unique offering. With this in mind, hard money isn't always the perfect solution for every investment real estate purchase. However, when you need a fast, flexible loan for a property that offers the potential of significant near-term equity growth, hard money lenders are hard to beat.
With more and more investors looking at participating in the recovering housing market, new challenges have arisen in figuring out where to invest your money. For a while, the biggest challenge was finding people who wanted to take out hard money loans. Today, it's selecting the best possible borrowers from the large pool available. Setting up a system for lending can help you to streamline the process.
In today’s investing arena the performance of most fixed income portions of investment portfolios is, at best, anemic. While the low interest rate environment is a boon to those seeking capital, for investors, the returns from the fixed income portion of their investments is unable to keep up with inflation.
Trust Deeds can be a viable alternative, offering substantially higher returns available in the real estate market, with considerably less risk and without the hassles of acquiring, maintaining and managing real estate holdings.
One of the most under-appreciated financial instruments available to the California real estate investor is the trust deed and the “hard money” associated with them. They are an excellent option used by experienced investors when a real estate deal is too unconventional for traditional lending institutions. In addition, they offer the same legal safeguards as traditional mortgages and usually come with a better degree of security.
A first trust deed is a financial document that transfers legal title of a piece of real estate to a trustee in return for a loan against the property by the trustee. A contract is signed that details the arrangement and if the borrower is unable to fulfill their part of the bargain, the property transfers to the lender.
Since traditional banks are not involved, the terms of these contracts can be almost anything that satisfies the borrower and the lender. Since the deals may involve some added risk, trust deed contracts generally have a slightly higher interest rate and require a lower loan to asset value.
The finding and use of hard money financing may or may not be known or seen as a viable alternative to the average real estate investor, but it is a legitimate funding source that is eschewed by traditional lending sources because it cuts into their own profits. In fact, “hard money” is used all over the country to get deals done that would otherwise never be consummated. Here are three tips to get the most out of this resource:
