Curiosity About Hard Money Loans
What Is A Hard Money Loan?
Hard Money loan is an instrument used by real estate investors in order to obtain a successful purchase. It is the avenue that allows an investor to grow his/her business at a fast, quick pace. They are provided by non-banking companies or private lenders. And It is the tool used to obtain a sale in a short amount of time.
Why do experienced investors trust Hard Money Loan?
They understand the benefits of the loan. They know that Hard money loans are backed by the value of the property, not by proof of income or tax returns. Investors know the ins and outs of fix and flips and buy and holds. That is the reason why they are confident to use it which makes new investors curious about it.
4 Advantages of Hard Money Loan
1. Hard Money Loans Gets You Approved Quickly
Hard Money Lenders know that transactions can close as early as 2 weeks. There is no need to verify income and tax returns. As stated, hard money lender lends on the asset or the appraised value of the asset. This makes it easier to get a loan. Lenders understand the urgency of releasing funds which is the reason why they approve investors very quickly. Hard money loan is a strategy for investors closing a property on their preferred time frame. The quicker the purchase the faster the investor gains inventory.
Investors who learn about the advantages of hard money get amazed on what they can do with hard money and how it can help them jump start their business.
2. Requirements Are Just Few
Compared to bank loans, Hard Money Loans only require much less information- LLC docs and bank statements. Because of this, the loan gets approved with 1-2 days and then the process begins. Bank loans, on the other hand, require multiple requirements and loans do not get approved if the required items are not provided and the loan takes much longer to get approved due to processing and investigation on the buyer's end. Unlike Hard Money Loans, bank loans would require proof of income, income tax returns and more depending on the lender handling the buyers this usually causes a transaction to be longer than the decided dates.
3. Asset Based Loans
One of the big advantages of hard money loans is Asset based therefore there is no need to verify income and tax returns. The hard money lender lends on the asset or the appraised value of the asset. This is why getting a loan approval gets easier. Though loans are asset based, hard money lenders still need to check fico scores, experience and the profitability of the deal.
4. Hard Money Loans Provide Approvals That Can Not Be Approved Elsewhere
We have already established that Hard Money Loans are different from bank loans. Compared to conventional loans, Hard money loans can assist projects that other loan companies could not support. Keep in mind that banks offer long term loans with an interest that needs to be paid for an amount of years depending on the approval. Fix and flip loans for instance, these projects involve short term loans in order for an investor to fund up to 90% of the deal including rehab money to make the necessary repairs for the property and sell them as quickly as possible. This is the only loan investors need to pay the loan back versus the 30 year commitment loan of a conventional bank loan.
If you are considering doing a hard money loan keep in mind these four advantages to carry on during your decision making. Being able to understand the benefits and work around this loan will be more advantageous when applying the first time. Doing your own research and trusting an expert and asking questions will help you understand more. If your goal is to grow your business and become successful in the field of real estate consider what other experienced investors using Hard Money Loan and why they consider it as part of their business.