Hard Money Loans: The Quick Fix For Beginning Investors

Real estate investing has always been glamorous. Recently, the excitement of buying and flipping real estate has become a staple of television programming. You've been sitting on your couch watching people buy homes, fix them up, and sell them for profit. You've mentally prepared a list of reasons you could do this. The primary obstacle to your achieving that dream of buckling up the tool belt and making some dough? It takes money to make money, and you need some to buy that first property.

There are many options out there for real estate loans. However, beginning investors face challenges from potentially having little capital or credit. Traditional bank loans depend on a solid credit history. Individual private lenders can also be hard to come by. Hard money lending has become an increasingly viable option for the starting investor.

What Hard Money Loans Provide

Hard money loans are those that are backed by assets for collateral. In terms of real estate, this means the loan is backed by the value of the property itself. You are lent a portion of that value, which leaves equity for the lender should you default on the loan. That protection isn't always there in other varieties of private money lending, which often means more aggressive tactics to recoup the investment.

Hard money loans are typically not dependent on past credit history. Even a bankruptcy in your past doesn't disqualify you from a hard money loan. In exchange for the easier acquisition of such loans, lenders can often have more stringent guidelines on lending.

A Quick and Efficient Means To Fund Your Flip

Maybe credit histories and bankruptcy aren't a problem for you. Traditional bank loans take time - upwards of thirty days! When it comes to investing in real estate, you don't always have the luxury of time. Hard money loans offer a solution here as well. Since these loans are backed privately, funds can be available in just a few days. This provides you agility in your investment - you can fund it as quickly as you decide to flip it. The loans are usually short term, aligning nicely with the time frame of your project.

A Few Things To Consider

Now that you're ready to pursue a hard money lender for your project, there are a few things to consider before taking the plunge. These loans can be framed with a balloon payment down the road. High default interest rates are often part of the package as well. You'll need to be secure in your ability to make these higher payments in the future. If not, you could find yourself dealing with interest rates as high as 29%!

Alright. You're done watching television shows. You've found the perfect property to start your investment career. You've read all about loans and types of money lending. All that's left for you to do is go out there and find a lender to fund your dreams!