What are hard money lenders? What are hard money loans? What are trust deed investments? You have questions and we have the answers. Here are the hard money loan basics.
First of all, what does the term “hard money” mean? There are two types of money, “soft” and “hard”. Soft money is easier to qualify for and the terms are generally more flexible. Hard money is much harder to qualify for and the terms are incredibly strict. Hard money loans are used for investment purposes because the interest rates are generally higher. For hard money loans, borrowers turn to hard money lenders because traditional lenders make it much more difficult to be approved for a loan. Traditional lenders have a strict set of criteria which the borrower must meet and if their credit score is even one point off, they will not be approved. Hard money lenders, however, are more concerned with the market value of the property, equity, and income.
Developers, flippers and long term investors are the blood of the hard money business. These type of investors main concern is getting the deal and making money from it. Most Real estate investors don’t really show much income on their tax returns but they do make enough money to make the payments, so they cannot qualify for a loan with a conventional lender. Hard Money will provide them the money they need to purchase/refinance their real estate within days without looking at their tax returns or credit.
This is where trust deed investing comes into play. When investing in a trust deed, the investor is buying someone else’s real estate loan, which is secured by a trust deed. When a real estate investor purchases trust deed, they are setting up a relationship as an intermediary between the original lender and the borrower. In Trust Deed investing the name/company name will be on the actual deed as the lender with and ROI of 10% to 12% and interest only payments. This rate will be decided upon by the investor and the borrower and the payments are delivered to the investor on a monthly basis.
An important aspect of alternative lenders is that they can offer flexibility, liquidity, and partnership. Unlike traditional lenders, hard money lenders can offer partnership and communication in your investments and projects. When you are investing in real estate, you’re not just looking for financing, you are looking for a lender who values open, two-way communication. Some important Trust Deed Investment Information you’ll need are the basics of finding a great MLB. Communication, integrity, and timeliness is most important. Finding an alternative lender to handle these investments doesn’t have to be difficult. Find out more about HML Investments here.