Politics and Business

3 Easy Ways to Understand Hard Money Loans

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There’s money to be made in real estate investments, but you must leverage enough capital to get started. Smart investors like to move quickly and take advantage of the alternative California investment property loans available through hard money and private lenders.

Here are a few ways to think about these financial tools:

Fast and Convenient Alternatives to Bank Loans

Traditional banks might help you if you happen to have great credit and sizable savings. Banks offer stability and low-interest rates, but qualifying is difficult and slow.

Banks often require supporting documentation to prove income and assets which can delay a deal for several weeks or even months. During that time, your competitors steal attractive properties out of the market.

Hard money lenders often approve transactions in five days, and some might even offer same day approval.

Hard Money Loans Are for Investment Lending

These short-term loans meet the needs of investors and they offer many conveniences to entrepreneurs beyond just speedy approvals.

Real estate investors value these hard money lending features:

  • Loans for any type of property including multi-family, commercial, land, and rentals
  • Lenders who focus on the property as collateral instead of credit, income, or assets
  • Financing based on the After Repair Value (ARV) rather than current market value

Due to the increased risks, the interest rates are much higher. Unless a homeowner is in dire financial circumstances, traditional bank loans are still better for financing a personal residence.

Hard Money Loans are Short Term Deals

Hard money loans are often called “bridge loans.” The investor is not purchasing bridges. Instead, the term refers to the short term of the loan. Most borrowers only have twelve months to pay back the entire balance.

This strategy works well for both rental investments and flipping houses. A landlord might use a hard money loan to bridge a gap between two longer term bank loans. A speculator could also use one of these loans to hold a property just long enough to refurbish and resell it.

Are you thinking about real estate investing? Let us help you find the best hard money loans Los Angeles has to offer. Also, contact us and ask about the best private money lenders San Diego keeps hidden from the public.

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