With short term and high interest-only loans, why would anyone use hard money or private money lenders?
Below, we review some of the main benefits of using a hard money loan for real estate investing:
1. Quick and fast funding: With “in-house” underwriting, you can be approved and funded much more quickly than traditional bank loans, sometimes within days rather than weeks or even months.
2. Easier, streamlined approval process: Yes, there’s paperwork, but we focus primarily on the property value, making it easier to qualify compared to conventional loans.
3. Ability to provide flexible terms: We can tailor loan terms to meet the specific needs of the investor and project.
4. Less emphasis on credit score: While credit is still considered, it is only one factor and we are generally more lenient about credit issues compared to traditional lenders.
5. Perfect financing option for fix-and-flip projects: The short-term nature of hard money loans (typically 6-18 months) aligns well with the quick turnaround these investors need.
6. Typically, investment properties don’t qualify for traditional financing. A hard money or private money loan can be used for these properties that banks won’t touch due to their condition.
7. LEVERAGE: one of the most overlooked benefits of private money loans is that it allows investors to invest in more properties! Even if you had the capital, being a real estate investor is capital intensive so using hard money loans allows you to purchase multiple properties rather than tying up all cash in just a single property.
8. Strong offers using a “proof of funds” letter. As a private money lender, we can provide a proof of funds letter so you can make cash offers which can be more attractive to sellers. This can potentially lead to more and better deals and/or price!
Hard money loans can offer many advantages. In fact, if you find a good deal, often, financing the project is the “easy” part!
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