10 Reasons Real Estate Investors Use Hard Money Loans
1) Faster close
Since hard money loans are designed to cut through the red tape of conventional financing, using hard money loans gives investors the ability to negotiate shorter closing timelines with sellers. Providing sellers with proof of approved funds lets them know you can expedite the transaction, edging out any competitors waiting the 30-45 days conventional lenders take to approve and release funds.
2) Limit dependence on credit
Property value and borrower experience drive the loan amount and terms of hard money financing, meaning hard money lenders will not judge an investor solely on their credit history when considering a loan application. The value of the real estate will be the key consideration.
3) Secure more properties
Hard money loans allow the investor to reserve their own capital as they secure more properties—conserving cash on hand to complete other projects. With the added leverage of hard money loans, investors’ funds aren’t all tied up in one project.
4) Cash-out refinance loans available
Investors can use hard money loans to do a cash-out refinance on the properties they own. This provides additional capital to fund all-cash property purchases, or to apply down payments on additional properties.
5) Avoid focus on bankruptcy
Some investors have difficulty getting new loans due to past financial issues, such as bankruptcies. With hard money loans, a past bankruptcy will not automatically disqualify a borrower, since loan approval will be based more on the value of the property.
6) Lenders offer advice
A hard money lender can also offer expert advice on the borrower’s real estate project. Since the safety of their loan is tied directly to the subject property, hard money lenders will have a vested interested in the success of the project.
7) Hard money lenders provide solutions
Hard money lenders are also more likely to be flexible than traditional lenders and can offer solutions to challenges investors encounter in the process of improving and reselling or renting their investment properties. Hard money lenders encourage regular communication and transparency while the project progresses, to avoid any surprises and to provide solutions as soon as issues arise.
8) Tailored Loan Options
Hard money lenders can provide investors with loan options tailored to their specific needs. Loan-to-Value (LTV), interest rate, points, and term lengths can all be adjusted on a case-by-case basis. Hard money lenders can also give investors the option to bring cross properties they own as additional collateral to meet LTV requirements.
9) Stronger negotiating position
A hard money loan gives the investor a stronger negotiating position when competing with other property investors. A hard money loan can be considered a more reliable source of funding than conventional bank financing.
10) Quick approvals
Hard money loans can be approved in as little as 3 to 5 days. Traditional loans can take up to 45 days to receive approval.
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