Private/Hard Money Loans

[Charles Patrick II]

Hello, I am new in the real estate game and I am wonder why going through a hard money or private money lender works in the case of either buying and holding or buy and flipping a property. Thank you!

[David M.]

@Charles Patrick II

If you aren't owner-occupying, the hard money lender is an option. The main advantage is speed and limited "red tape" in getting the loan. There is much less regulation on it. Furthermore, it can be used on pretty much the most distressed of properties. Conforming residential loans (which require owner occupation) generally require a "functioning" house on the property. So, if you run across a property that is basically gutted or perhaps a failed septic, then the HML will work. Other loans will not work at all.

The HML are designed to be short term, 6-12 months. After a potential extension, you are supposed to refinance (and the hard money lender will do that for you if you like) into a conventional loan should you decide to keep the property for a rental or something. Otherwise, you are doing a flip and so will sell it to somebody else that will get a conventional loan.

That's the short of it.  Does that help?  Good luck.