How do you secure a loan to buy investment property if you have bad credit? Hard money loans could be the answer.

Whereas the average home buyer might give up on the idea of buying a home with bad credit after being turned down by multiple lenders, those interested in using real estate as an investment are more likely to continue trying to learn how to get a home loan with bad credit.  There is good news for these persistent house hunters.

Hard money lenders can provide a solution for certain types of real estate investors, and if you already have some capital you can take full advantage. In addition, any equity you’ve managed to build through other properties could be leveraged to gain access to hard money loans.

However, you may first want to ask: what is a hard money loan? Furthermore, how can it benefit you and how can you secure such a loan? Here are a few things you should know if you’re interested in using your real estate equity to secure loans for additional property purchases.

What is a Hard Money Loan?

If you’re wondering how to get a mortgage with bad credit, hard money loans could be the answer, but they’re not for everyone. Before you get your hopes up you need to understand what this type of lending is all about.

Hard money lending focuses on real estate investment, so if you’re looking to purchase a primary residence for your family and live there for the foreseeable future, you’re going to have trouble nailing down a hard money loan. Such loans are financed by private investors looking to turn a profit.

On the one hand, this means you’ll probably never have to go through a credit check to get a hard money loan. On the other hand, you must have some amount of capital or collateral to put on the table, as well as a short-term plan for profit if you want to gain the interest of hard money lenders.

Who Can Get Hard Money Loans?

Hard money loans are most often approved for real estate investors looking to turn a quick profit on property. Whether you’re interested in flipping homes, earning a passive income from rental property, or taking on commercial real estate, quick returns are a must.

Hard money loans are generally short-term, often providing terms for repayment within 1 to 3 years (although occasionally longer). This means you must have a plan to start earning and pay off your loan post haste.

How Can I Leverage My Real Estate Equity?

Hard money loans require cash or collateral up front. Generally, borrowers must pony up about 25-35% of the value of the property in order to secure a hard money loan. If you have existing property with enough equity, you can leverage it to secure the loan you need for your next real estate venture.