There’s a lot of misinformation and misunderstanding out there about hard money loans, but they can be a lot more effective than people think. The problem is that a quick Internet search will return tons of results with headlines like:
- “What to Watch Out For”
- “The Pitfalls of Hard Money Loans”
- “Are Hard Money Loans Worth It?”
When you’re inundated with those as your first search results, it’s easy to dismiss hard money loans for your investing needs. With a bit more understanding, however, hard money could prove to be the ideal funding solution that you’ve been looking for.
When Are Hard Money Loans a Good Choice?
Real estate investors don’t always have the funds to match their drive and passion, yet finding people to invest with them can prove to be a challenge. If you’re in a position where you feel like you could be making a strong business move but you don’t have the means to finance your purchase, hard money loans might be a good choice. In fact, they might be your only choice.
What is it that makes these loans one of the better options? For starters, they’re quick. Most hard money loans can be closed in a matter of days, rather than weeks or months for a conventional loan. Once you develop a relationship with a lender, it can be an even more expedient process in the future. As we know, in hot markets, every minute counts.
These loans can also be more flexible and typically don’t rely on borrower credit scores or personal financials. They are asset-based loans, which means that when you’re investing in real estate you can borrow up to 75% of the value of the property, and sometimes more depending on the lender and/or property type. As an example, if the property is worth $1,000,000, a hard money lender would be willing to lend up to $750,000 as long as the borrower can prove the means to repay it. These short-term loans make a lot of sense for investors who need to close quickly or do not have the personal financials to support such a loan.
Hard money loans can be a bit more expensive and difficult to find, but they’re a great resource for those who need them. If you’re looking at real estate investing but need to find an alternative to traditional mortgages, these loans might be the perfect solution.
H&O Capital Funding has helped countless real estate buyers, sellers, lessees and lessors achieve their goals. Our legacy is unwavering commitment to the communities we serve. Houlihan & O’Malley Commercial Real Estate Services specializes in four distinct, yet overlapping, areas of business: Commercial Brokerage services, Private Mortgage services, Appraisal Services and Advisory services.
For more information on loans that we offer, visit our website.