Being an investor can be quite difficult, especially if you are working with fast fix-and-flip projects. In most cases, investing will require that you get a loan. The good thing for you is that there are a lot of options when it comes to getting a loan. That being said, the most popular way of getting a loan is through hard money loans for real estate. What makes this loan different from let’s say a more traditional one is that it is not given by a bank. Hard money loans are acquired through private lenders. So, for you to obtain a hard money loan, you will have to find a private lender that is willing to lend you a loan. These loans are best used for short-term investments that will be flipped fast for a profit.
If you are an investor that is looking to learn more about hard money loans, then you are in the right place. Here we will try to go over everything that you need to know about hard money real estate loans. We will cover everything from what they are to what the potential risks are. So, if you are interested in the topic, let’s not waste any more time.
The Basics of Hard Money Real Estate Loans
Depending on what your plans are, a hard money loan can be just the thing for you. As we mentioned, if you are looking for fast fix-and-flip projects to invest in, then hard money loans are the way to go. These loans are perfect for these kinds of projects as they are best suited for short-term investments. First thing first, before you go and get the hard money loan, make sure that the property you have been eyeing is really going to be worthwhile. If the property is promising, then the lender is more likely to provide you with a loan. You can expect to get the loan extremely fast after the lender finishes the evaluation.
That being said, there is still a possibility to get a loan from the bank. Well, for the type of investing that is in question, a bank loan will not be an option. The main reason for this is that the bank loan will take significantly longer to be approved compared to a hard money loan. No bank is willing to take on risks that a hard money lender will. Another thing to keep in mind is that the bank has a very long list of loan eligibility requirements that you need to cover before you even qualify for a loan. Even if you manage to clear all the steps, as we mentioned, it will take a long time before you can get that loan. On the other hand, a hard money lender does not have a lengthy list of requirements and the loan they provide is much faster.
When you get a hard money loan, it is going to be short-term. In the majority of cases, a hard money loan will have a repayment period of about one year. In some cases, it can go to two years but rarely above that.
Getting the Loan
If this is your first time applying for a hard money loan, it can be a bit confusing. It is nothing like getting a loan from a bank. The most important thing is to find a reputable hard money lender in Florida that you can work with more than once. This will definitely help you a lot down the line. Building a good relationship with a lender can help you get loans that are considerably better for you. Additionally, you will be able to get a loan much easier and faster. In order to find someone like this, a good way to start is with a simple internet search. This way you can find hard money lenders in your area, contact them, and find out if they are worthwhile. Furthermore, another great option is to join a real estate club where you can directly talk to other investors and gather information.
Another option is to talk to your friends if they are also in the investing business. Ask around, maybe they know someone and they can put in a good word for you. This way, not only do you find a trustworthy lender, but you will have better chances to receive a loan because of the recommendation from your friends.
As with everything else, there are risks involved with hard money loans. The major problem that might arise is connected directly to the lender. We cannot stress enough how important it is to find a trustworthy lender. When you decide to get a loan, keep an eye out on the interest rates, and make sure that they are not higher than they should be. Always double-check everything before you sign any paper. We hope that everything we mentioned here is going to help you to get a hard money loan safely.