subject: Hard Money Lenders: What Does It Take To Become One? [print this page] Everybody is looking for the perfect investment in real estate today. Real estate has proved to withstand the challenges of the global financial crises, providing a wide range of business opportunities to investors. Hard money lenders are individuals who lend private money to borrowers who are in critical financial situations. It involves the mortgage of your property under certain circumstances when the borrower fails to meet the requirements of the agreement.
As mentioned, hard money loans are highly beneficial to individuals who are under shaky financial conditions either in default on mortgage payments or on the brink of foreclosures. Most hard money lenders do not require their borrowers to show documents which traditional financial institutions usually ask. One does not have to worry about a horrible credit score or an unstable financial income.
So how can I make a hard money loan?
The lender limits the loan able amount to about 50% of the appraised value of your collateral property. Even if the marketing time to resell the property gets longer than expected, the lender is still guaranteed to get a good investment return. Hard money loans can be very risky. It offers high interests which may double or triple what banks offer. Loans may be granted on a short term but eventually blows up and gets due in full after 3 to 5 years. These types of loans can be approved easily and thereby, closed over a shorter period of time.
What are the advantages of hard money lending?
Hard money lending has its own share of advantages. Its biggest advantage is the convenience and the speed in which they can be approved. Banks usually need a month or two to approve loans. Commercial loans take even longer.
What are the disadvantages of hard money loans?
As mentioned, one of the biggest disadvantages of hard money lending is the high interest that it offers. Yes, they can be instant solution to your problems but getting away and paying up everything may also be difficult to do. If you plan on borrowing hard money, it is very important that you make all payments on time. Note that private lenders do not usually give grace periods and failing to meet your due dates can cost you more than what you are expecting.
Real estate ventures are not only about investing properties, a lot of hard money lenders have proved to be very successful in this field. You can, too!
