Eager to join the world of real estate investing, you have most probably done some research on how to make the right steps towards it. You’ve read about all the strategies, and you’ve taken the time to carefully define your goals. But, you know that there is still quite an important aspect to handle here – the aspect of funding.
If you’ve done your research on funding as well, you have come across one interesting concept. That is the concept of hard money in real estate and the loans that can provide you with quick capital when you need it. Yet, even though this may have sounded quite appealing right from the very start, you are most likely not ready to go through with it just yet, before you figure out precisely what it means and how to get a good solution for yourself.
In other words, you want to get a better understanding of hard money loans in general, after which you also want to figure out how to get the perfect one for you, should you decide that it is the right move. Well, those are the topics that we will cover for you today, then, hoping to help you not only make up your mind, but also figure out what your next course of action should be. So, without any more ado, let us start answering the important questions.
What Are Hard Money Loans?
Unsurprisingly, we are going to begin with the question of what hard money loans actually are. After all, we can’t go talking about how you can get one of these if you’re not even sure what they entail, and let alone whether you want to get them or not. Let us, thus, make things clearer.
Basically, when talking about hard money loans, we’re talking about short-term asset-backed loans. What does the fact that these are asset-backed mean here, though? In the simplest words possible, it means that it is secured by real estate, and that’s precisely where this solution significantly differs from those traditional borrowing options you may be used to already.
Read more on how they work: https://www.investopedia.com/terms/h/hard_money_loan.asp
So, while the traditional lenders will be looking at your income, your credit history, and your general financial track record, this is not what you should expect from hard money lenders. Quite on the contrary, they will look simply at the value of the property you are buying. That makes this the perfect opportunity for people with less than great credit score, as well as for those that have no steady income history, and generally for everyone who is looking to gain quick access to capital.
Speaking of quick access, here’s what you should know next. Given the fact that the lenders look simply at the value of the property, you’ll need to provide much less documentation during the application process. What’s more, the actual assessment and approval process will also be quite faster, and you can wind up getting the money you need in a matter of days. This sounds amazing when compared to the traditional solutions, which usually require you to wait for weeks, or sometimes even months.
In addition to that, it’s worth emphasizing that these are short-term loans, which means that you won’t be indebted for a long time. The period usually ranges from 6 to 24 months, depending on the actual lender. That’s why it is the perfect opportunity for all of those investors who are looking for quick capital, and who are also looking to gain quick returns, by flipping houses, for example, or using another short-term investment strategy. You can learn about different strategies on this page.
One more thing to know here is that these often come with higher interest rates, which should be quite logical, given the flexibility and the quickness they offer. Every investor has to decide for him or herself whether it pays off to get this loan. When you think about it for a while, though, you will certainly realize that it is a smart decision even though the interest rates are slightly higher, because it basically allows you to grab great opportunities quickly.
How to Get Them?
You now know what it is that hard money lending entails. The only question that’s left is how you can actually get one of these loans for yourself. The good news is that this really isn’t difficult at all. All you have to do is find the right lenders and apply for the solution.
Finding the right lenders requires some research, though. So, you’ll have to check out more of them, inspect their reputation and take a look at the borrowing terms they’re offering. Then, compare your findings and choose the lender you believe is best for you. Once you’ve done that, just fill out the application and wait to be approved and get the money you need.
