Real estate investors may be deterred from taking advantage of hard money loans because they assume that the interest rates will be too high to make this type of loan product profitable.
However, it's important for real estate investors to explore the option before they arrive at this conclusion. The following are five big reasons why working with a hard money lender can help those investing in real estate to make more money:
You get access to funds quickly so you don't miss out on fleeting opportunities.
When you come across a good deal, you need to act quickly so that the seller doesn't close with another buyer before you're ready to make an offer.
With hard money loans, you'll get the capital you need right away, so you can make an offer the moment you see a good investment opportunity. Without a hard money loan, you'd have to wait until a conventional loan is processed and the funds hit your account.
You offer sellers advantages over other bidders on a property.
Experienced real estate agents know that hard money loans allow borrowers to access funds immediately. They therefore are likely to be more inclined to work with you if they know you're being financed through a hard money loan.
Real estate agents want to close sales as soon as possible so that they get that commission. Offering the advantage to real estate agents of being able to close the deal immediately might give you priority status on the list of potential buyers.
You can use equity on properties you already own to make more money.
With hard money loans, you need collateral to be approved. This is no obstacle for a real estate investor who already has equity in numerous properties.
Hard money loans put your equity to work for you by allowing you to invest in more properties.
You can acquire financing even after you've maxed out the possibilities on conventional loans.
There are always limits to how much an investor can borrow in conventional loans. Hard money loans offer some extra funding after you've reached a point where your income level and credit history aren't enough to allow you to borrow any more.
You can purchase a property at a lower price.
Usually, buyers can work out a deal that allows them to pay less on a property purchase if they're able to offer cash upfront. If hard money loans can allow you to negotiate such a deal, they are likely to allow you to save more money than they're costing you in interest.
When I started my own company, I knew that I needed a little business capital and fast. In an effort to raise money, I worked with various lenders to discuss loans, financing, and special terms. Unfortunately, I quickly discovered that not every loan was created equally. Some loans had almost predatory terms like high interest rates and penalties, while others were completely fair. Fortunately, a business consultant of mine taught me about loans and financing, so that I could make better choices in the future. The information on this blog saved my business, and I know that it can help yours too.