subject: Why Real Estate Investors Rely On Hard Money Financing [print this page] If theres one thing a real estate investor can live without, it is probably hard money financing. Hard money makes a investors job a lot easier. Being asset-based, hard money loans enable a real estate entrepreneur to obtain funding for his investments regardless of his credit rating. In addition, securing this type of financing is fast and easy.
Hard money is an equity-based loan wherein a propertys after repair value, or ARV, is used to determine the eligibility of a loan. Unlike in traditional financing, neither the borrowers credit score nor his current financial status is of great consequence. Whats important to hard money lenders is the profitability, as well as the marketability of the real estate for which the loan is being made.
Typically, hard money loans have a loan-to-value ratio of 65%. That is, if a property is assessed to be valued at $100,000 after all the necessary repairs and renovations have been carried out, then the borrower can get around $65,000 from the lender.
One of the reasons why many real estate investors use hard money financing for their real estate projects is that the process of loan approval is much easier. Unlike their traditional counterparts, hard money lenders are easier to convince. A borrower doesnt have to undergo stressful credit checks or deal with a processing team.
Hard money lending also has less red tape involved. Because most hard money lenders work on their own, real estate investors dont have to persuade a lot of people just to obtain approval for their loan application. If the lender says yes, youll get your money, ASAP. You dont have to hear the opinion of other personnel in the hard money lenders office.
Unlike banks and mortgage companies, however, most hard money lenders dont have store-front offices nor do they advertise their services using glaring neon signs. To find a good source of hard money loans, you can get referrals from your fellow real estate investors, title companies, settlement attorneys, and accountants.
Another option is to attend meetings and seminars organized by the local real estate investing club. Most hard money lenders attend such gatherings for the same reason as you do. They participate in REIA meetings in hopes of finding a real estate investor who might be in need of hard money.
You can also surf the Internet to find someone who can provide you with hard money financing. There are websites, particularly
www.RehabHardMoney.com, that can hook you up with the best hard money lenders in your area.
