Did you know that hard money financing carries some of the highest interest rates of any type of money lending at more than 20 percent? Investing in real estate or other assets is often a big business that requires help from a hard money lender to secure the necessary capital to make your big purchase.
If you plan on making a living off of investing then it is important that you understand what hard money is and the best ways to go about making the most of your hard money loans. There are many benefits to understanding what is hard money and how you can use it to grow your investment portfolio.
If you've never considered using hard money lenders to finance your investments then it is time to grab a seat and get your reading glasses ready to go. You've come to the perfect place to learn all about the ten benefits that come with using hard money financing for your investments.
Keep reading this article to learn more today.
1. You'll Close Faster
Hard money is great because it is designed to be used in a way that allows you to cut through all of the red tape and avoid all of the hoops that most people encounter when they make a big investment like a new home or a multi-family unit. Conventional financing is great for most people but when you're running a business you can't afford for months of the closing time to pass you by.
Getting hard money loans allows you to bypass all of that and close on your next big investment much faster than going the conventional route of getting a loan. Your negotiating timeline will move up in a considerable fashion and help you to close on your new property in the blink of an eye.
Going with hard money will show the sellers that you have proof of the necessary funds for getting a deal completed. From there, they'll feel comfortable with speeding up the process. You'll benefit from this because you can cut out the competition for the property that you want since they'll be waiting longer due to using conventional lending practices.
2. Limits Your Credit Dependence
A massive part of the equation that drives the terms of a loan and the down payment that you make on your investment loan is the property value and the experience that the borrower has in the industry. You'll find that getting hard money loans involves a lot more than merely looking at your credit history and credit score.
The value of the property that you wish to purchase is a huge factor in determining the amount of hard money that you'll get to work with. Keep that in mind when you decide to move forward with a 100% hard money financing option for purchasing a home or an apartment complex.
3. Gain More Properties
If you're planning on having a successful career of investing in properties and renting them out to tenants then you'll want to set yourself up to have the ability to continue adding properties to your portfolio. A big part of that is knowing how to use hard money loans in an effective manner.
Getting a hard money loan means that your capital is protected for use on other investments that will grow your wealth. You'll have a much easier time gaining more properties when you have more of your own cash on hand to spend in other areas and on other properties.
In short, you'll have a lot more money to play with and spread around rather than having all of your capital tied up into one investment. You'll be on the fast track to gaining more wealth by going through a hard money lender for your real estate investments.
Hard money financing is also a great option to take if you're looking for ways to get cash out of your existing properties through refinancing. Many property owners use the equity that they have in their homes or properties to make additional investments without depleting the amount of cash that they have for living and working on other projects.
Understanding hard money will help you to make purchases for new properties in cash to speed up the process while still allowing you the flexibility to use your cash for other investments that will add value to your portfolio. You can also use the hard money for down payments on multiple properties if you want to grow your burgeoning real estate business in a much faster way.
Consider going this route if you find multiple properties that are perfect for what you envision when it comes to your growing real estate empire. You'll be cash-rich and property-rich when you look at using hard money financing for getting more properties and assets.
5. Avoid Issues Related to Bankruptcy
Many seasoned investors will experience failure with their endeavors at some point or another. It is a matter of time before something that you invest in goes bankrupt but that doesn't mean that you should be unable to secure financing for future projects.
Getting conventional financing becomes tricky when you have a bankruptcy on your record but going with hard money financing gets rid of that issue entirely. You'll have no issues getting new loans when you go with hard money financing because the most important piece of criteria for getting the loan is the property value.
That isn't to say that the lender won't take your past bankruptcy into account, but it isn't the most important thing. They'll look at the value of the property as well as your credit history to find out if you're a worthy investment for their money.
6. Gain Valuable Advice and Insight
In addition to providing you with the much-needed capital to make your next big investment, your hard money lenders are also experts when it comes to using your funds. Make sure that you take advantage of their knowledge and experience when you're looking at the best routes to take for using those funds.
Keep in mind that they have some skin in the game so they have a vested interest in helping you succeed with your investments. Bounce your ideas off them and get feedback about your ideas for your next real estate investment. They'll have every reason to help you out and give you sound advice before you invest the money that you've borrowed from them.
Make sure that you make the most of this benefit because odds are that they've been involved in real estate for a much longer period of time than you have. This is huge if you're getting started with your real estate business.
7. Your Hard Money Lenders Provide Solutions
It is no secret that traditional lenders are pretty inflexible when it comes to loaning out money to investors and people that are looking to add assets to their portfolios. You're left with a limited amount of solutions to issues that you encounter when you go with a traditional lending option rather than choosing hard money financing for your projects.
Hard money lenders are great because they have a ton of flexibility. This means that they're much better equipped for helping you out no matter what obstacles you're facing. It doesn't matter if you're planning on purchasing to improve a home or property or if you're purchasing it to rent out to tenants.
Your best bet for success when it comes to working with hard money lenders is to be upfront and transparent with them throughout the entire process of your real estate project. They're invested (literally and figuratively) in the success of your project and will be happy to think of solutions to problems that you're running into.
Being open with your communications with the hard money lenders will help you both to avoid surprises. It is also the best way to come up with timely and effective solutions to the issues that you do encounter when moving forward with your projects.
8. Tailored Loan Options
There is no cookie-cutter option to choose from when you choose to go with conventional financing for your real estate projects. That makes it difficult to get the loans and money that you need to grow your real estate investment company. You'll end up with a loan that doesn't meet your needs if you choose to take that route.
Hard money lenders, on the other hand, are well-equipped to help you out with loan options and hard money financing that are perfect for your real estate project that you envision. They're able to adjust a wide variety of things in order to make the loan work for you and your company.
They can adjust the loan-to-value ratio, the interest rate, the points that you get, and even the term lengths on the loan that you take out with them. Keep in mind that this is done by the hard money lender on a case-by-case basis, so don't count on this if you decide to go with hard money financing.
You also need to think about the fact that these hard money lenders might want to use some of your existing properties as collateral for these changes to the investment. This is a great way to improve the loan-to-value numbers. You'll get more favorable loan payments on the money that you're borrowing for financing your projects.
9. Stronger Bargaining Positions
It is no secret that investing in real estate is a big business and competitive industry. Every little thing that gives you an edge is huge for your chances of getting the properties and homes that you are wanting to purchase. The stronger your position is for negotiating, the better your odds are of getting the property that you want at the price that you're hoping for.
Going with a conventional financing option is great. Still, it could put you at a massive disadvantage when it comes to getting the property that you want. You'll have to jump through a great number of hoops and cut through a bunch of red tape in order to get the deal across the finish line.
You'll also have to hope that no one comes in with a better offer while all of that is going on. Going with hard money financing shows the seller that you're ready to do business. It is proof that you have all of the necessary capital to get the deal done as soon as possible.
It is also beneficial for the seller when you choose to go with hard money financing instead of choosing conventional financing. Most sellers consider a hard money loan to be much more reliable than a conventional loan for purchasing a property. You'll be at a major advantage for bargaining compared to investors that are using conventional financing methods to make the purchase.
10. Quick Approvals
Time is always of the essence when it comes to investing in anything. That holds true even more when it comes to growing your real estate empire. A huge disadvantage of going with conventional money lending methods is the time it takes to get approved for the proposed loan.
Going with a conventional loan could take as long as 45 days to get approval to move forward with the purchasing process. When you add in negotiations and the closing process it could take you months to add the property to your portfolio.
Choosing to go with hard money financing gets the ball moving much quicker. It takes a short period of time to get approved for the hard money loans. The average hard money loan takes somewhere between three and five days to get approved for.
Consider Hard Money Financing for Your Real Estate Projects
Hard money financing is an effective way of securing the money that you need in order to grow your real estate business. It is important that you understand the benefits of getting hard money. Hard money lenders move much quicker and they don't disqualify you if you've filed for bankruptcy in the past.
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