Would it help you as a real estate investor to be able to “Close For Cash in Days,” even if you’re tapped out financially? Hard money lenders are perhaps the best way to get financing with easy qualifying money, and fast closings.
Hard money loans are easier to get and fund very fast at lightning speed. They are referred to as asset-based lending, especially with real estate investors. The collateral on the loan becomes from the real estate, and the loan is primarily written based on collateral and not so much on borrower credit. They are far from conventional loans, since the underwriting guidelines that private money go by are far different from your local banks.
The maximum loan to value for most private loans range from 60% to 80%. No deals are done at the higher loan to values for two reasons. First, hard money lenders require lots of equity in case of default. Then they can list and sell the property quickly because it will in theory be below market value. “In theory”, because there are so many REO’s, Short Sales and foreclosure properties on the market today that what was normally considered an exceptional deal is common place. Therefore, private lenders are more particular about the properties, borrowers and loans they choose to fund.
Today, many private lenders focus on city, state, and regional lending boundaries. This allows them to know the markets very well. A thorough understanding of foreclosures, new construction, and market trends provides a comprehensive view of the lending area. With this understanding, more often than not, private lenders will know almost immediately if the loan is something they are interested in, something they will look at, or if it is just out of their scope at the present time.
These loans are often funded by pools of private investors who have been grouped together into a pool of capital by a lender. The hard money lender is looking for maximum return, and is willing to take more risk for this return in the form of easier lending standards. If you strike the right purchase deal, you can even borrow 100% of the purchase price plus some or all of your repair money by using hard money lenders.
Hard money is great for beginning investors who may not have lots of money, or for those who have bad credit and cannot qualify for a traditional investment loan. Investors also use hard money when they need to purchase quickly. Typical soft money or conventional loans take 30 days or more. Sometimes that is too long for an investor to get a good deal on an urgent sale. Using a hard money lender is also a creative way to finance a property. Most like to call it “Nothing Down”. If you can borrow enough money to buy the property, fix it up and then sell it under market value for a profit, then you’ve just made money without any of your own money. Sure it will cost you interest payments to borrow that money, but the rewards far out way the expense.