Real estate is a wise investment and opportunities abound, but investors have to be prepared. The people with funding in place can secure properties first, in what are often very competitive markets. Investors who want to be fast are quickly learning how beneficial hard money funding can be.
What is Hard Money Funding?
Hard money funding is based on assets, rather than credit scores. Unlike a conventional bank, hard money lenders do not care as much about an individual’s financial history. Rather, the lending is weighted toward the real estate asset.
You can use hard money for construction, purchases, bridging sales, and other real estate transactions so long as the loan is based on the asset and its potential future value. Hard money funding applies to residential, commercial, and industrial projects, depending on what your lender is willing to cover. It is worth discussing your project with a lender in a consultation, as many are flexible.
Understanding Hard Money Lender Terms
Investors should be aware that hard money funding usually comes at a higher interest rate than a conventional loan, as these loans are considered to be a higher risk to lenders. The loan will be based on the after repair value of the home rather than its actual value, as determined by appraisal. Typically, hard money lender terms set out a schedule with interest-only monthly payments, and then a larger balloon payment that comes due at the end of the term. Your individual hard money funder will set up the term length with you.
Check out your lender’s private lending website to learn more about their terms and conditions.
Lender News and Trends
As private money lending becomes more common place, lender news, and trends are worth watching.
With bridge and payday loans included, the hard money lenders’ industry creates at least a trillion dollars of loans each year, with hundreds of lenders in every state. Clearly, hard money lending is not going away any time soon!
Some experts are saying that technology is improving not just access to lenders but also lenders’ transaction speed, with readily accessible data making lenders particularly efficient. You can often submit information right through your lender’s private lending website to start the process quickly.
Overall, the market appears to be healthy and growing, which is a great sign for real estate investors. According to a LinkedIn Pulse report:
“All market research for 2016 points to steady growth, healthy metrics and plenty of available capital – all of which mean good opportunity for borrowers.”
Now is the time to invest, and it’s easy to invest with hard money for construction, fix and flip, rehabbing, or securing new properties. However you choose to jump on real estate, do it in partnership with a hard money lender.