subject: Hard Money Lenders: Settling On The Non-traditional Way Of Funding [print this page] When real estate investors speak about hard money lenders, they are referring to private organizations or people which have more flexibility to generate many different financing. They are able to get this done, because they are not controlled by the same guidelines that commercial banks should run under. They have the power to pre-approve borrowers and work instantly. For this and other reasons, they are becoming increasingly in demand, particularly with rehabbers.
Even if you're experienced in buying, repairing and reselling a home, you may find that it's more troublesome to obtain a regular financing than it used to be. Bankers, distressed by the effects from sub-prime financing created several years ago, are being much more cautious these days. You may have to consider a new alternative for your future property.
Even though hard money lending isn't new, the combination of today's economy and its effect on the real estate sector has produced new awareness in this kind of unconventional financing. With the economic difficulties in some of our popular cities, more property owners are moving or changing careers. Several are just unable to keep up with those adjustable interest rates and balloon payments or just the escalating property taxes. Most of us can experience the potential for huge profits when sellers are this determined. All we need to make that profit is money.
Traders could possibly get the best cost on a home when, for points like those noted above, the seller must close fast. Bankers do not seem to understand the necessity for speed. They take the same span of time, generally at least one month, to close, no matter what the specifics of the settlement. It takes about two weeks to get a loan approved and they don't pre-qualify loans or offer proof of funds letter. To put it differently, they do not make special considerations for the rehabber. Hard money lenders are known for helping rehabbers.
Deciding on hard money lending over a regular bank financing will allow you to take full advantage of your existing investment, purchase more homes and get them reconditioned immediately without making cash supply hassles. 100% funding of the purchase value, the repair costs as well as the closing costs might be offered if you could obtain a really good purchase amount, relative to the after repair value.
You will find other factors to choose private, rather than commercial loans. Faster closing, more manageable transaction programs and no charges for early payment are among them, but keeping the cash "flowing" is probably the most essential.
