Are construction loans better than using hard money lenders?

[Donald Lanzer]

I posted a couple days ago about hard money lenders. Since then I have been considering a construction loan as an alternative. I'm possibly going to make my first rental purchase. It is a fixer upper and banks don't want to do the financing so I'm trying all possible ways to make this deal go through. Any thoughts? Thanks!

[Seth Williams]

Better? Eh. Different more like. Conventional funding through a bank, so much more time involved. For instance, you using your income and W2s typically to secure the property and loan, not just simply the hard asset - aka hard money - a lien position secures this loan vs you personally. With banks, and construction loans, your going to run into time to close, time to release funds in certain steps, contractor reviews, and so on. Hard money is simple, can close quick and lots of less red tape, but comes at an extreme premium in rates. If you can go construction loans, its worth exploring. If you need to get cash quick to close a deal? Go hard money. Its easy to go hard money if the points are cheap and then REFI into a Construction loan, if applicable.