No real estate investment plan is complete without a property, a plan, and the money to make it all happen. Whether you have the capital to invest or not, hard money lenders are a good option for any potential investor to look into. The key to hard money lending is that the loan (also called a bridge loan) is directly fixed to the value of the property itself, rather than to the lender. This method of lending and investing not only allows you to obtain funding even if your own credit is lacking, but has the added benefit of combining both your risk and collateral into one tangible feature; the property itself.
Hard money loans are unique in that they are designed to facilitate short term situations and investments. These loans should be used to finance properties that are quick flips or will act as income properties for the owner. If you are confident that a property can be turned around quickly or if you find a property that has established tenants (who have a history of paying on time), a hard money loan is ideal. Obtain the financing, turn the property or the profit and move on to your next investment. These loans are great for a rapid investor.
Another example of wise usage of the hard money loan is when considering investment in a commercial property. Although this area of investing can be precarious, as an investor, you may find yourself in an area that closely zones residential and commercial properties. If you are looking to establish a local foothold, it may behoove you to also consider a commercial property. In this case, a hard money loan makes a commercial investment less risky. The value of the property is the collateral and basis of the loan, therefore you are not risking capital and relying on finding a tenant immediately to secure a profit. With a hard money loan, you can safely invest in a commercial property to bolster your local portfolio.
When seeking a hard money lender, be sure to come prepared with all the information pertinent to your investment property. Each lender will have its own parameters by which it decides on which properties to invest in and which they will pass on. The key to hard money loans, is finding a lender who matches your own needs to their own. Once you obtain a loan, however, you and the lender essentially assume the same risk, which is beneficial to you as a private investor. Likewise, be advised that you also share in the success of the investment, as hard money loans usually involve higher than average interest rates.
In short, when considering short term investments, a hard money lender is the way to go. Use this opportunity also to expand your portfolio to commercial properties. Although short-term lending can be scary, a value based loan can help to ease you into the market and brighten your real estate horizons.
Property Bridge is part of a nationwide group of investors who are helping tens of thousands of homeowners every year. We may not be the “traditional” route, but we can help and we can do it quickly. Give us a call today at (662) 228-6088 to let us know what you need help with!