Real Estate Blog

The Hard Money Guide for Real Estate Investors

Real estate investors were denied from almost all funding sources after the big housing crash in 2008. Residential rental homes and fix and flip properties had become unreachable, and it was bad news altogether for investors. 

Luckily, things have changed a lot over the last decade, and real estate investors now have numerous funding options. One of the most convenient options is going for hard money loans. 

What is a Hard Money Loan?

Real estate investors typically use hard money loans for short-term projects. Whenever they're planning a flip and flop, or refinancing and renovating a property, they usually turn to hard money loans. 

Hard money loans are asset-based financing options. They are often referred to as "easy money with hard terms." It's risky for the lender to fund a distressed property, so the terms are shorter, and the rates are much higher than those in traditional loans. 

However, hard money lenders will gladly consider lending money to borrowers rejected by traditional lenders. Even when the properties are severely run down, the lender will consider the value of the property after repairs as a significant part of their lending criteria. 

Hard Money Loans for Real Estate Investing

Hard money lenders don't usually care about lending cash to homeowners to buy their dream house. Instead, they are focused on funding real estate investment properties. Most often, the properties need fixtures and work to get to their full potential. Usually, the property is either up for quick resale. In other cases, it is a rental property that's up for buying and fixing. The lending criteria is based on the sole purpose of hard money loans - to help investors fix, renovate, or sell commercial properties. 

Hard money for real estate investors is a perfect solution for all those who don't have enough cash on their hands to pay for every property they buy. 

Although the deal comes with short terms and high rates, hard money loans are usually a simple numbers game. When you calculate the cost of the property along with fixes, investments, and repairs, hard money loans are usually a good choice regardless of high rates. 

Investors who hesitate because of the high rates understand that hard money loans may be the only way to get the cash they need. Since a part of something is better than nothing, they usually decide to take a loan instead of walking out from a very profitable deal. 

Top Reasons To Go For a Hard Money Loan

  • Flexibility – it’s way easier to get a hard money loan than a traditional loan. Hard money lenders are far more flexible than banks and other big financing institutions. 
  • Approval – hard money lenders often finance investors that get refused by other institutions
  • Timing – you can get a hard money loan within several days

Hard money loans are closed quickly, and they are specifically created for investors to be able to fund a project when they need money fast. Since time is always essential in real estate investing, having the option to get a loan within a couple of days is often a deal-saver. 

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