If you are a real estate investor or own real estate and are unable to obtain financing through conventional sources, then a Hard Money Lender may be your answer to obtaining financing. Hard Money is the term used for loans funded by private parties seeking high returns on investments that are secured by real estate or another asset that can be sold in the event of a default by the borrower. Do not be fooled by the name, Hard Money lenders are not Loan Sharks and are commonly used in the Real Estate Industry as a form of quick accessible financing.
Hard Money Lenders not only arrange loans for new borrowers, but, they also sell these loans to to private investors. These types of loans are typically short term in nature, 1 to 3 years. Many of these loans are for real estate investors (or developers) who fix up properties and sell them for a quick profit. Typically, these notes are secured by single family residences, duplexes, apartment buildings, mobile homes, commercial properties, retail centers, and storage unit facilities.
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Hard Money Lenders charge more for their loans than traditional lenders. Today, interest rates are 9% to 12%, with Loan origination fees between 3% to 5%. The stronger the credit rating of the buyer, typically the lower interest rate and fees. Because these loans are secured by real estate, underwriting will usually require an appraisal. Once the loan is funded, it is then sold to private investors.
Benefits of Hard Money Loans
- Funding Solution other than Banks or Insurance Companies
- Quick Alternative Source of Financing
- Short Term Loans – 1 to 3 years
- High Returns on Investment to Buyers of the Notes
- Loans are secured by Real Estate
Having easily accessible cash flow can play a vital role in the real estate investment. Particularly, for investors who specialize in fix and flip projects. Private Hard Money lenders fill a void from the banks by providing fast, flexible access to short term capital needs that are based on a borrowers experience, credit, and merits of the deal.
Although Hard Money Lenders charge a premium for facilitating their loans, it enables their clients to get much needed construction dollars with maximum loan to values. In turn, these borrowers improve distressed homes or properties by hiring people to work in effort to complete their renovations. In the end, the investor who purchases the note makes money, jobs are created, which in turn helps our towns and communities.
Check out the Video Below for more information about Hard Money Lending.