Consider Hard Money Lenders

At some point in your real estate career, you will need to come up with quick cash to close a deal

. When all other options fail or are not feasible, such as in the case of a short-sale, consider hard money lenders when fast cash is needed for real estate investing. Before even considering this option, it is important that you choose your lender carefully and fully understand the terms of the lender.

What is a hard lender?

Hard money lenders are an alternative loan source when you need money fast. They are more expensive than traditional financial institutions, but in some cases, you can have cash in hand within (3) business days. The term "hard money" is due to the hard terms involved when dealing with this type of lender. The interest rates can range anywhere from 10-20%; however, it is a viable option when you have no other way to come up with cash quickly.

Hard money loans typically have terms from three months up to 12 months. The length depends on your specific needs and the lender's guidelines. If you choose to go this route, obviously, the longer you have the loan the more expensive it will be, so it is important to have a solid plan to repay the loan as soon as possible.

Limited Red Tape

If you have an opportunity to grab a great piece of property that you can quickly flip and make a profit, this may be a reason to consider a hard lender. The LTV or (loan to value) ratio on a hard money loan is usually lower than with traditional lenders. The LTV usually runs in the 70% or lower range. This will be based on the property appraisal. If your funds are tight, remember that you will still need a title policy, insurance, and an appraisal, which will require additional funds. In addition, hard money lenders usually require origination points in the range of 2 to 10 points and these must be paid up front. Hard Money Lenders are Not Bad Credit Banks Hard money lenders are not an alternative financing source for individuals with bad credit. Although their requirements are less stringent than most banks, they will not overlook a bad track record of not paying on time. Bankruptcies, charge offs, and collections will all come up and will be taken into account when making their decision.

Beware of Hard Money Loan Sharks

Although there are legitimate hard money lenders in this business, there are also those who straddle the ethical/unethical picket fence. These are the types of lenders you don't want to deal with under any circumstances. Their goal is to set you up for failure and leave you with nothing. It's sad to say, but this does exist more than you know.

If you are looking to turn a property around quickly for a great profit and you choose to use a hard money lender, make sure that you are dealing with a credible company. This method of borrowing should only be used as a last resort, and you should make sure that you have sufficient means to repay the loan in case your deal doesn't go as planned. You may even consider a back up plan, like refinancing to a conventional loan before the loan is due.

Carefully review all of your options, and move forward with your eyes open.

by: Tasha Gill

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