Follow these real estate tips. Use hard money loans. Here’s what you should know about hard money loans to keep you from losing money on your investments. A hard money loan is a short-term loan for individuals purchasing residential or commercial real estate. These individual generally flip the properties in order to make a profit. Hard money loans are also available for land purchases.
Because the hard money loan process is significantly shorter than that of a traditional loan, investors use hard money to acquire investment properties quickly. Hard money lenders to do not use the same strict set of criteria traditional lenders use when extending credit to borrowers.
Not every investor has a perfect credit score which is why many consider hard money loans. While traditional lenders focus exclusively on credit scores when it comes to loans, hard money lenders focus on the market value of the property. They’re not concerned with your personal credit. Instead, they are focused on the real estate deal in question. This is how hard money lenders protect themselves in the event of default.
Knowing the value of the property helps them limit the amount they loan to the borrower so that they can recoup their investment by taking back the property. This is how hard money lenders are able to provide financing to investors who would not be approved for a loan from a traditional lender.
Hard money loans are great for real estate investors because they are flexible, short-term, and fast. They are perfect for fix-and-flip projects whether it be commercial, residential, or luxury property. Here are some hard money loan tips:
It is important that you do your research on the property and determine the market value including any costs for repair and maintenance that it may require. Not being upfront and honest about the property and the loan will only waste their time because the numbers don’t lie. Being honest with the lender will help strengthen your business relationship with them and will benefit you with future investments. That being said, if you feel the lender is not being honest with you, don’t work with them.
Have an exit strategy. Even in the case of a low-risk and structured investments, things can always go wrong. There are some things that just can’t be avoided no matter how hard you plan. The key is to be prepared for these events when they arise. It is important to be prepared if things don’t go as planned. Present the lender with your exit strategy when applying for the loan. This is show them that you are a smart and serious investor.
Look at the property yourself. Have an experienced appraiser look at the property. Don’t guess on any of the numbers. Make sure that your application is accurate and sound. There is no such thing as too much planning when it comes to real estate investments.