Benefits of Using a Hard Money Lender
Have you ever used a hard money lender for a real estate investment project? If you’re just getting started in real estate, you’ll soon learn that the ability to act quickly and access reliable cash goes hand-in-hand with success. Whether your traditional lender moves at a snail’s pace or you’re unable to secure conventional financing, a hard money lender may be the right partner for you. Let’s learn more about the many benefits of this type of funding.
What is hard money?
First things first: A hard money loan, which is funded by private investors, is a short-term financing option. This method of non-traditional financing can be used for land, commercial properties, or residential development. Hard money loans are ideal for:
- Developers who need to act fast on a deal.
- New investors who are just starting out.
- Properties that require significant work.
- Development projects on bare land.
- Those who may not qualify for traditional bank financing.
Could a hard money loan be right for your project? Here’s how it works: A borrower secures the loan against their real estate assets, which can be an already-owned property or equity in the property being financed. The monthly payments are then made up of either interest only or a balloon payment at the term’s end.
5 advantages of a hard money loan
Don’t miss out! Hard money loans come with some pretty sweet advantages:
- Quick loan approval: Time is of the essence for real estate investors, who must often act fast to secure promising properties. Private money lenders can fund loans in much shorter time frames than traditional lenders (and with less paperwork, too!). This lets investors quickly secure funding and start work on their development or rehab projects. Private money lenders also focus on the value of a borrower’s assets to determine loan-to-value ratios.
- Fewer restrictions: Traditional lenders are burdened by copious governmental regulations so it’s usually not possible to acquire a non-conforming loan. Hard money lenders, on the other hand, don’t need to adhere to the same government regulations so they have the freedom to provide customized loans with a personalized touch. A private lender has more flexibility to tailor the loan to the specific project.
- Flexibility: Since hard money lenders don’t need to follow the same regulations as traditional lenders, they have a level of flexibility that benefits investors who need quick turn-around or who don’t qualify for conventional loans. Plus, compared with banks’ preference with putting down 20%, a private lender may grant a borrower 100% of the purchase price. This means a borrower will need to pay only the origination fee and monthly interest until the loan is paid off.
- Future value assessments: Hard money lenders provide a loan-to-value ratio based on the value of the finished property. This lets borrowers obtain – as part of the total loan amount – the funds needed to fix up a property.
- Negotiating power: Thanks to a hard money loan, investors can offer a fast closing and because they have cash in hand, they can often negotiate a lower purchase price. Not only that, but the more that real estate investors work with a private lender and honor the contract terms, the more likely the lender will want to work with them on future projects. As lenders trust more in the relationship, it’s likely they’ll provide even better terms, such as offering to loan a higher percentage of the purchase price or lowering the origination fee.
Want more information about hard money loans?
Contact AIC for business, commercial, and investment equity loans. We’ll help you finance vacant lots, rehab projects, new construction, and partially-completed construction, as well as refinancing. If you’ve been turned down by conventional lenders, we may be able to help! Our loans are usually structured, so you only pay monthly interest with a balloon payment. AIC’s business-purpose loans are designed to fit your needs and position your project for success.
AIC has been working throughout Oregon for over 35 years. We take pride in cultivating strong and profitable relationships with investors in areas like Portland, Salem, and Bend. Contact us at 541-343-9714 today or fill out our form. Let’s get to work!
Seeking an investment partner?
AIC is accepting loan requests for a variety of projects, from new construction to fix-and-flips. We’ve been serving Oregon markets for over 35 years by bringing together private money and real estate opportunities. Contact us today at 541-343-9714 or use our form if you have any questions. Let’s chat!
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Categories: Investing Strategies