Hard money loans are short-term loans for a real estate investment. These individual generally flip the properties in order to make a profit. Hard money loans are also available for land purchases. Because the hard money loan process is significantly shorter than that of a traditional loan, investors use hard money to begin your real estate investment quickly.
There are many reasons why a hard money loan may be beneficial to a real estate investor. For example, if a borrower is unable to get a loan from a traditional lender because of bad or no credit. Because traditional lenders have strict regulations for loans, it can be extremely difficult to qualify. There is no room for leeway or negotiation, even if your credit score is just a point off. Hard money lenders are able grant loans to individuals with bad credit because they focus mostly on the value of the property since the property serves as collateral.
Hard money loans are also a great option if the investor needs money for a real estate investment quickly. Hard money loans can be processed in a matter of days.
According to Scotsman Guide, this is another scenario that an investor might find themselves in that would warrant a hard money loan:
“Let’s say you have a borrower with a 430 credit score who is hoping to fund a transaction on a residential investment property. The borrower has bought a house with cash and now needs funds to clean up his credit and make some minor improvements to the property.
The borrower is unable, however, to obtain traditional financing because of his low credit score. With a hard-money loan, the borrower likely will be able to pay down some debt to increase his credit score and land a long-term tenant after some minor repairs are completed. The borrower then will be able to refinance into a bank loan because of his improved credit score and the property’s documented cash flow. In short, a hard-money loan can help a borrower get over a financial hump when a traditional loan is out of the question.
This is just one example of when a hard-money loan can be beneficial to a borrower. Each loan scenario must be evaluated carefully to ensure that hard money is the appropriate way to go, but in many cases, as long as there’s ample equity in a property — or ample cash for a downpayment — a hard-money loan can be a viable funding alternative for your clients.”
Unlike traditional lenders, hard money lenders can offer real estate investors partnership and communication. When you are flipping a house, financing isn’t the only thing you need. You want a lender who values open, two-way communication. Traditional lenders may have strict regulations for potential borrowers but hard money lenders work with the borrower to find a loan that works for them. Communication, integrity, and timeliness are important when it comes to finding a lender. Finding an alternative lender to handle these investments doesn’t have to be difficult. Find out more about HML Investments here.