Are you considering buying an investment property but don’t have enough cash to make the purchase? Hard money lenders can be a great option to finance your investment properties. In this article, we’ll explain how to use hard money lenders and the benefits of doing so.
First, let’s define what a hard money lender is. Hard money lenders are private investors who provide short-term loans for real estate investments. They typically provide loans for up to 24 months and charge higher interest rates than traditional lending institutions.
The main advantage of using hard money lenders is that they are more flexible than traditional banks when it comes to loan requirements. Unlike banks, hard money lenders don’t require perfect credit scores or extensive paperwork. This makes them a great option for people who may not qualify for traditional loan products.
Another benefit of using hard money lenders is that they can move quickly on a loan decision. Traditional banks can take months before making a decision on a loan application, while hard money lenders can often make decisions in days or even hours. This makes them ideal for people who need to act quickly on an investment opportunity and don’t have time to wait for a bank’s approval process.
When it comes to repayment terms, hard money lenders typically offer shorter repayment periods than traditional banks do. This means you’ll pay back the loan faster and with less interest paid over time. For example, if you borrow $100,000 from a bank at 5% interest over 30 years, you’ll end up paying almost $160,000 in total (including interest). However, if you borrow $100,000 from a hard money lender at 10% interest over 12 months, you’ll end up paying just over $113,000 in total (including interest).
Finally, using hard money lenders allows you to avoid tying up your own funds in an investment property purchase. If you use your own funds to purchase an investment property and something goes wrong with the deal (e.g., tenants fail to pay rent or the property needs expensive repairs), then you could be out of pocket for months or even years before recouping your losses. With a hard money loan however, the lender is taking on all of the risk so if something goes wrong with the deal then it’s their loss – not yours!
In conclusion, using hard money lenders can be an excellent way to finance your investment properties without risking your own funds or having to wait months for bank approval processes. Before selecting a lender however it’s important that you compare different options and make sure that any fees or charges associated with their services are clearly outlined prior to signing any agreements with them.