Typically, traditional lending institutions are not really interested in any real estate deals other than those involving buyers who wish to buy and reside in a single family home. While they will offer excellent terms to these potential buyers because of FHA guarantees, investors looking for money to buy fix and flip, buy and hold, or 2-4 SFR Multifamily properties, face a far more daunting task when it comes to finding investment capital.

While private or “hard” money lending companies may seem like one of the last places where an inexperienced investor should look, they actually provide a neutral and non-threatening platform where borrowers and lenders can meet each other and appraise their mutual needs. Still, many of the same questions that arise in a traditional investment setting are applicable. Here are just a few that every investor should ask:

Distressed and vacant properties frequently provide the best return on investment relative to other, more stabilized, properties. Instead of making your money through slowly increasing rents and net operating incomes, you earn profit by buying at a good price, rehabilitating it and selling it at a higher price. Leverage, like that provided by hard money loans, increases your returns and makes these potentially lucrative investments even more valuable.

If you're a property investor, you know that hard money loans are a very powerful tool. In exchange for paying a slightly higher interest rate and origination fee, they give you fast access to money on very favorable terms. While traditional lending is an excellent option for some transactions, hard money is the way to go for deals that need a little something extra.