Once again, we are in that phase of the real estate market in which hard money lenders are playing a very important role.
If you haven’t used them before, what is a hard money loan? How can private money lenders be different from hard money lenders? When is the right time to use this type of financing? Could you actually find that getting involved in the market as a hard money lender is one of the best ways to invest today?
Hard Money Loans
Hard money loans are a type of asset-based lending.
These loans are typically much easier to qualify for than conventional loans. More emphasis is put on the property being provided as collateral than the borrower themselves.
While these loans typically come with lower LTVs and higher interest rates than conventional loans, they are far easier to qualify for, and can often be closed and funded in a matter of days, versus weeks or months with other loans.
This makes them especially beneficial for those who need money fast. Even more so for real estate investors and house flippers. Though you can also become a hard money lender yourself.
Hard Money Lenders Vs. Private Money Lenders
As the financial market has evolved over the past 12 years, more are defining themselves as private money lenders instead of hard money lenders.
Some hard money lenders were associated with negative trends, like very high interest rates and loan costs. With some being perceived as being a little too happy to see their borrowers fail and give up possession of their property to their lenders.
Private money lenders seek to distance themselves from this as a new generation of investor friendly funding. One which offers more competitive rates, and a superior blend of underwriting, more attractive LTVs and rates, and yet, with the ability to close quickly.
Whether you are seeking local hard money lenders in NJ, New York, or Florida, you will find options.
When To Use Private & Hard Money Loans
These types of real estate loans are ideal for those who need funding fast.
Some property owners may choose them when they are in a distressed situation. When they need cash out immediately, or they have ballooning or maturing loans which they need to satisfy.
More commonly, these loans are used by real estate investors to acquire new properties. Assets which they may fix and flip, or improve, lease, and then refinance.
This type of funding can allow investors to take down deals that other lenders won’t lend on, and to become very competitive buyers who can offer sellers rapid closings.
Becoming A Hard Money Lender
In addition to making money in the real estate market by borrowing hard or private money, you may also invest in these loans, and become a lender.
Some experienced investors consider this to be the best way to make money right now.
It is an investment strategy that enables you to help others, and generate strong returns, with concrete collateral, at the same time.
It eliminates the need to be involved in all of the work of finding properties, renovating them, and reselling them. Yet, you can still make strong yields, and benefit from passive income coming in every month.
The simplest, lowest risk, and most efficient way to do this is to invest your private equity through an existing fund or lender that has the infrastructure and relationships in place already.
Current factors at play in the economy and real estate market are making private money lenders and hard money lenders more in demand.
They provide a vital service. One which you may find great value in using yourself.
For those looking for alternative investments, this may be the sweet spot you’ve been looking for.