Real Estate Investing Blog - DiscountedProperties.com

If you are in the real estate investing business and looking for financing for your next real estate deal, you may have a difficult time, given the current state of the credit market.

However, all is not lost, as you may want to consider securing a hard money loan. Hard money lenders are financing companies that use real estate as collateral. In other words, the real estate you plan to purchase for your investment property will back the loan. Most hard money loans are secured for non-owner occupied properties.

Hard Money Lenders 101

Hard money loans are short-term loans, backed by private investors, who charge a much higher interest rate than traditional loans because they do not conform to traditional banking standards. Soft money loans, on the other hand, are those traditional loans that are secured through a traditional lending institution.

Hard money loans serve a very useful purpose, particularly for real estate investors who are looking for a short-term loan to finance their investment properties. Although the interest rates on hard money loans are much more than traditional, soft money loans, this typically does not affect the investor, as he or she carries the loan for a very short period of time.

How Hard Money Lenders Calculate the Loan

Hard money lenders typically calculate the according to the ARV (after repair value) of the property. Most hard money lenders will loan an investor about 70 percent of the ARV. This protects the lender in case the borrower defaults on the loan and the lender must foreclose on the property and resell.

Interest rates vary between hard money lenders, but they typically range between 12 and 20 percent, depending on the investor’s credit score and real estate investing experience. Most hard money loans last anywhere from a few months to several years, depending on the investor’s needs.

Benefits of Hard Money Loans

* Hard money lenders may provide you with the loan quickly, which is important for investors that must move rapidly on a real estate deal.

* Hard money loans are ideal for beginner investors who may not have much capital.

* Hard money loans are often used by investors with poor credit that may have difficulty securing traditional loans, as they are equity-based and no asset or credit-based.

* Hard money loans can be used to refinance a default personal mortgage loan.

* Hard money loans are ideal for today’s investors that cannot secure a traditional mortgage loan due to more stringent lending guidelines.

If you are looking for ways to finance your next real estate investment, consider looking into hard money lenders to help you turn your property into profit.

When you’re trying to buy and sell as many properties as you can get your hands on, sooner or later you’re going to be faced with the reality that without additional cash, your real estate investing career is going to come crashing to a halt. A good hard money note buyer can put much needed cash in your hands today so you can get on with the business of buying more properties.

If you’re carrying the financing on one or more of your investment properties, you’re all too aware that buyers aren’t always as committed to making on-time payments as you thought they would be when you signed on the dotted line. Instead of waiting for payments to trickle in when they buyer is ready to make them, you can cash out of your contract by selling to a hard money note buyer. A hard money note buyer will pay less than is owed on the contract, but you’ll have cash in your hand you can use for other investment opportunities.

As a real estate investor, you know the importance of leverage in securing additional property. By taking advantage of the fast cash that can come your way from a hard money note buyer, you can use the influx of cash to secure much more real estate that can help you capitalize on the profit potential available in today’s exciting real estate market.

A hard money note buyer can make it happen today.

Real estate investing is basically a tug of war between profit and loss. Once you’ve found a property you think has the potential to help you reach your financial goals, reality sets in. If this investment is going to pan out the way you have it planned, you’re going to need to locate a good residential hard money rehab loan. On this front, there’s good news and bad news.

First the bad news: Residential hard money rehab dollars don’t grow on trees, and there are fewer lenders today than there were just a year ago. Hard money lenders – like the more traditional institutional lenders – have tightened lending restrictions and many have gone belly up.

Now the good news: While there are fewer residential hard money rehab lenders, the ones that remain are stronger than ever and are more committed to sticking around for the long term. They have cash to lend, so if you have a winning project and you can demonstrate a solid plan for turning a profit – and you can back your plan up with solid numbers – you stand an excellent chance of being approved for your residential hard money rehab loan.

You’ll pay more in interest and points than you might like, but the important thing is that your project can still be funded, even in these challenging times. So do your homework, find the most lucrative investment properties you can, and take your proposal to the residential hard money rehab lender of your choice.

The time to seize your future is now, while prices are low, and other investors are afraid to pull the trigger on investing. Conditions are ripe for massive real estate profits. Are you ready?

Hard money finance can be a means to an end for some people and it can be beneficial. But, it really should be thought of as a last resort and not something to bank on for a long term solution. There are a few advantages to hard money finance but there are a ton of risks. Before discussing the pros and cons of hard money finance, let’s first define what, exactly, it is. Hard money finance is a loan that uses your real estate as collateral and is generally given to those who are in a position to be unable to get a traditional loan. Usually these loans are offered by private companies not banks.

So, you can’t get a traditional loan but you can get hard money finance. What’s the problem? Sounds good, right? Here’s where we discuss the cons:

First, hard money finance loans are usually secured with your real estate which means your home or property. This in itself is risky but not more so than a traditional mortgage which basically does the same thing. But, the loan itself is usually set at a much lower loan to value ratio than a mortgage. For example, say you have a home worth $100,000.00. The maximum amount you would likely get from hard money finance is $70,000.00 or 70% of the value. Often the ratio is even lower than that.

Next, the interest rates on hard money finance are exorbitant. Where a mortgage may have varying rates depending on your credit score, hard money finance starts high regardless of how pristine your credit is. While an estimate for hard money finance interest rates can not be accurately made because it varies greatly depending on the real estate market, most will start no less than fifteen percent. That’s a pretty high interest rate to get into!

So, you know what your risks are: you will likely have a huge payment, high interest rates and a low LTV rate. Are there any advantages to hard money finance? Yes. Is there ever a time you should use hard money finance? Sure.

Hard money finance is easier to get into. Credit is not usually an issue. You get your money faster also so you can spend it on what you need to. So, there are certain situations where hard money finance makes sense. In the case of getting into a fixer upper property or in bailing yourself out of a possible foreclosure, hard money finance can be just the ticket. But, hard money finance is beneficial if only used as a short term solution.

For example, say you are about to have your house foreclosed on because you lost your job. You can get hard money finance and save your home. If you gain employment and are able to refinance in a traditional manner, while you may have paid extra for the creative interim financing, you still have your home and the bulk of your investment. Or, if you have a fixer upper home a traditional mortgage company will not touch, you can get hard money finance if you believe you can flip the house or rent it and turn a profit quickly to pay off the loan.