Loan Programs

Hard Money Loans Open New Doors for Real Estate Investors

In real estate, how quickly one can obtain finances sometimes means the difference between success and failure. Conventionally, this comes with piles of paperwork, a lengthy approval process, and qualifications that are not easily met. For investors trying to act on a time-sensitive deal, these delays prove disastrous. Hard money loan programs are the solution to this problem because they facilitate speed and flexibility of access to finance. In real life, hard money loans are perfect for those investors in real estate who specialize in short-term projects pertaining to property flips, rehabs, and acquisition of distressed property.

Hard money loan programs vary from conventional loans in the sense that their main concern is the property’s value instead of the financial history of the borrower. These loans are generally made against real estate security and tailor special terms to meet various project needs. Hard money loans fill an important gap in the commercial real estate marketplace, where speed can sometimes be equated to high profits. Investors looking to diversify their portfolio or venture into newer vistas of investment must understand why and how hard money loans work.

Why Hard Money Loans Are Good for Investors

Hard money loan programs have gained lot of attraction in the real estate investment circles due to their very unique set of advantages. Among the most important benefits of hard money loan programs is the speed at which a loan is approved and funded. Most conventional lending sources involve a bunch of paperwork, credit check, and financial verification that in return delay the closing on a profitable deal, leading investors to lose multiple good opportunities. Hard money lenders, however, focus on quick access to capital. They can mostly process and approve loans in a matter of days and ensure investors have the required capital at the right time.

The other advantage of the hard money loan is that it provides room for flexibility in terms of the stipulated terms and conditions. Conventional loan facilities are usually inflexible, with minimal room for pressuring interest rates, repayments, or loan structure. Hard money lenders, on the other hand, can generally be flexible in adjusting terms to suit the investor’s project needs. The ability to adjust the loan to the investor’s cash flow or to a renovation timeline allows investors to make more purposeful and helpful decisions in regard to their investments.

Emphasis on collateral rather than on credit is another key advantage. Hard money loan programs base eligibility for a loan based on the value of the property rather than on the borrower’s credit history. The door can now be opened to first time investors who might have poor credit scores yet have good property investments in place. As long as the property provides enough collateral, the hard money lender will generally approve the loan.

How Hard Money Loan Programs Work

The dynamics of hard money loan programs are pretty simple yet effective. Normally, in a case where an investor spots a potential deal on property, he then approaches a hard money lender with all the details of the property and the project. The lender directly establishes the value of the property to ascertain how much they’re willing to lend. Unlike traditional lenders, which generally cap loans based on financial documentation, hard money lenders base their loans on a percentage of the property’s value, normally in a range from 65% to 85%. Once approved, the funds will be disbursed in an extremely short time, allowing investors to move forward without setbacks.

One of the strongest selling points that hard money loans have to a real estate investor is the ease of the process involved. Since these programs depend on the value of the property and not on credit history, the underwriting process is much more brief in comparison. The investor comes out ahead because he can negotiate terms that fit his investment strategy.

Why Hard Money Loans Are a Strategic Investment Tool

Hard money loan programs are a strategic choice for real estate investors desiring to secure efficient, flexible, and high-level funding. Based on the value of a property more than on credit, the hard money loan program enables investors to take advantage of timely opportunities, get financing for fix-and-flip projects, and gain access to larger loan quantities. The flexibility within hard money loans enables investors to tailor their loan structures to fit specific project needs, affording them greater control over their financial strategy. Usually, investors find hard money loans useful for funding rental properties such as Airbnb,  office buildings, apartment buildings, condos, townhouses, multifamily, SFR, and mixed-use properties.

Investors who understand and know how to utilize the special advantages of hard money loan programs are much better positioned to leverage those programs to gain an advantage in their drive to expand portfolios and become more financially successful. Coupled with reputable lenders, focusing one’s attention on high-value projects such as warehouse buildings, gas stations, shopping malls and hotels, opens up opportunities and secures lucrative real estate deals.