Getting Comfortable With Hard Money Investing

Getting Comfortable With Hard Money Investing 1

Getting comfortable with hard money investing
Many real estate investors overlook hard money loans as​ a​ strategy for acquiring property .​
That's because these loans are typically used by desperate property owners looking for a​ way out of​ the​ real estate market,​ rather than into it .​
But hard money can work for anyone,​ and it​ can be particularly useful if​ you're a​ new investor looking to​ build your portfolio quickly.
Hard money loans can generally be described as​ high interest loans available to​ borrowers with any credit rating,​ as​ long as​ they can can provide solid collateral - usually equity in​ real estate,​ such as​ a​ home .​
These loans are almost never issued by banks or​ deposit institutions,​ but rather by private lenders who specialize in​ short term lending at​ high interest .​
Normally a​ home owner in​ need of​ a​ big loan would apply for a​ second mortgage,​ using real estate equity as​ collateral,​ but bad credit can make things difficult here .​
If a​ home owner has missed a​ few mortgage payments,​ the​ banks may refuse to​ provide more financing - hard money might be the​ only option in​ this case .​
The limit for hard money loans typically hover at​ about 60 to​ 70 per cent of​ a​ property's quick sale value,​ defined as​ the​ price a​ lender could reasonably expect to​ realize if​ the​ borrower defaulted on​ the​ loan,​ and the​ property was liquidated fast .​
The interest rate for a​ hard money loan is​ usually in​ the​ 15 to​ 25 per cent range.
Investors can take out hard money loans to​ buy a​ property,​ as​ long as​ they provide acceptable collateral - in​ this case it​ could even be the​ property they're buying .​
The strategy here is​ to​ find a​ pre-foreclosure property,​ or​ any real estate with an​ owner prepared to​ sell below below market value as​ long as​ the​ sale is​ fast .​
If the​ investor can re-sell the​ property at​ full market value,​ before too much interest is​ paid on​ the​ hard money loan,​ he or​ she can make a​ significant profit .​
Hard money loans have helped many successful investors get started in​ real estate.

Getting Comfortable With Hard Money Investing

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