Whether you are looking to buy a home or make a real estate investment, chances are you need to loan some money in order to do so.
Apart from banks and credit unions, there is another type of lender out there who can help you get the funds you need. You probably already know that hard money lenders exist, but who are they? What do they offer? Are their services the right option for you?
Read on to find out more about how hard money lenders operate and what they can offer if you are considering applying for a loan to buy real estate.
Who Are Hard Money Lenders?
You can read up about the types of loans hard money lenders are offering, find answers to other questions, or even schedule a free consultation by visiting California hard money lenders.
Essentially, hard money lenders are people or groups of people who offer to provide funds to companies and individuals who need them in order to buy a property or make a real estate investment.
How Do Hard Money Loans Work?
Hard money lenders offer to lend money quickly based on the property provided as collateral. It is important to note that the money they lend is their own, private capital, unlike banks that use deposits.
This allows hard money lenders to make their own assessment on the merit of the potential loan to the applicant, and come up with loan terms which will be to the satisfaction of both parties. The amount you are able to loan is a percentage of the value of the collateral.
Once you take a loan from a hard money lender, you begin paying them back under contracted terms for the duration of the loan period, much like you would a bank, except that you get a say in the process of defining the terms of the loan.
So, what do hard money lenders have to offer?
Fast Loan Application Processing
This is really important in the real estate business, where you need to beat your competition to the properties with the greatest potential. In contrast to the long loan approval times you have come to expect from banks, hard money lenders can provide you with the necessary funds within a week.
This is because they understand how the real estate market functions and base their decision to loan you the money more on your property and investment plan than your credit rating and other factors.
The speed at which you are able to secure your loan can be even greater once you have established a good relationship with them through repeated cooperation.
Flexible Loan Terms
Another advantage hard money lenders offer is a degree of flexibility when it comes to the terms under which they agree to give you a loan.
Since they are not bound by pre-defined terms and regulatory bodies, they are free to negotiate with the borrower, in order to establish a mutually agreeable repayment plan. This also helps them retain long-term clients by providing them with certain incentives to continue doing business with them.
Buying Real Estate With Cash
Unlike banks, hard money loans provide you with all the cash you need immediately, which is one of its biggest advantages when it comes to buying real estate. Purchasing property with cash certainly has its benefits both for the real estate investor and the seller.
When buying with cash, the seller is much more likely to negotiate, especially if they are hoping to make the sale as soon as possible. Also, if there are several interested buyers, the possibility of making a quick close with a shorter escrow period will certainly make your offer stand out.
Their Knowledge And Expertise
The most reputable hard money lenders are very familiar with all the intricacies of the real estate business. After all, they need to be, in order to remain competitive in their field.
Since they are basically investing in your project, its success is your shared interest. If you don’t succeed, you won’t be able to pay them back, and they won’t be able to profit from loaning money to you.
Granted, they would get the collateral, but going through the foreclosure process and incurring other related expenses is nobody’s goal.
For this reason, they will utilize all their knowledge and expertise both to analyze your investment plan and give you sound advice going forward. No matter how experienced you are, the insights of an experienced hard money lender can prove invaluable for the success of your project.
Hopefully, you have a better idea about who hard money lenders are, how they function and why so many investors are using their services, after reading this article. If you are considering applying for a loan to buy or invest in a property, make sure you contact a hard money lender and see what kind of a deal you would be able to get.