Real estate investors and hard money lenders are two groups of people that are well-acquainted with each other. The opportunity to turn a profit is the glue that keeps them together. Real estate investors are interested in making money they don’t currently possess, while hard money lenders possess cash at-hand that they are willing to lend out and earn interest. It is a well-balanced act that sees both groups make a profit from real estate deals.
A hard money lender, also called a private money lender, is in the business of loaning out hard money and making a profit from the interest charged. Hard money loans are most popular among real estate investors. Private money lenders often take the shortest time to approve a loan. As long as you provide collateral to secure your loan, getting a hard money loan is sometimes as easy as shaking hands with a hard money lender. There are no procedural bottlenecks that drag on for weeks or months, as is the case with the traditional mortgage lenders.
For real estate investors, especially “fix and flip” investors, private money loans help them close a deal quickly. Private money lenders avail loans quickly to fix-and-flip investors, which helps them buy property on a quick sale. Therefore, it is not a surprise that in 2016, more than 6% of homes were sold by fix-and-flip investors, which is the highest percentage recorded in 10 years.
Real estate investors and hard money lenders work in tandem, all looking to make more profits and stay in business. Given that the institutional lenders have installed complicated processes even for investors with good credit, private money lenders will remain the go-to partners for investors.
Are you a real estate investor? Here are more advantages of working with a hard money lender for you to consider.
Fast Loans With Flexible Repayment Terms
Private money loans involve only two parties: the private money lender and the borrower. Therefore, it is easier for them to talk extensively without awaiting further approval. This is a fair negotiation because the hard money lender will state the loan conditions and the borrower will accept them or renegotiate. There is no going back and forth, asking for approval. Once the two parties agree on the terms, and after the lender conducts due diligence on the borrower’s collateral, the loan is issued in one or two days.
As things don’t always go as planned and investments go south, a borrower has the chance to return to the hard money lender and determine more flexible repayment terms. Other times, the borrower may make a profit faster than expected and decide to renegotiate terms and pay the loan in full. It takes only some minutes or a few hours on a phone call or a face-to-face meeting.
Leverage to Buy More Property
Real estate moves fast — and for investors without cash at their disposal, they could miss out on many big deals. However, when an investor has a good working relationship with a hard money lender, all it may take is a brief phone call for a loan to be approved. Most people selling real estate are only interested in getting their cash fast. With the backing of a private money lender, an investor stands a better chance to close the most competitive deals. Sellers also prioritize the investors backed by a hard money lender, because they know they will get their money fast.
Hard money lenders are not limited to real estate investors. You can seek hard money personal loans for other needs. Borrowers only need to avail collateral; that is enough to get them a loan. People also take out private money loans when they have an emergency and need money fast to pay for medical bills or court fines. However, real estate investors utilize private money loans more than any other group of people. It is also easier for a hard money lender to lend to a real estate investor as it is faster to evaluate and value property put down as collateral.
If you’re involved in real estate investing, you might want to consider what hard money lenders can do for you. To learn more, please contact us today.