There is no doubt that real estate ventures are one of the most lucrative businesses, however they require a huge amount of investment capital. Not all investors have that much money in their account, but it doesn’t mean that you should give up the idea of real estate investment. There are a number of financial solutions available, among which hard money loans are considered the best for real estate investment.
Let’s see what hard money lenders offer real estate investors and how investors can find them.
What is a hard money loan?
A hard money loan is a short-term loan that uses real estate assets as collateral and offered by hard money lenders. These lenders can be individuals or a group of individuals who lend their surplus money and build their capital by earning interest and points on that money. Unlike traditional banks, hard money lenders are flexible in terms of interest rates and their lending criteria. The hard money loan products are specifically designed for real estate investors who do not have deep pockets. The major benefit that you can get by approaching a hard money lender is that they will typically fund those properties that traditional banks will never finance, such as distressed properties.
Why some people choose a hard money loan over one from a traditional financial lender?
Hard money lenders offer various exceptional services that most conventional banks fail to offer their customers, especially real estate investors. Here is what you will get while working with a hard money lender:
- Fast funding: When you work in the real estate sector, you know how much time and money are important. Many investors want to purchase the same property that you want. To close the deal, you will have to be ready with cash. If you apply for a loan at a traditional bank, they will require a lot of paperwork and take a lot of time too. If real estate investors wait for 2 to 3 months, they may lose the opportunity. On the other hand, a hard money lender requires only a few documents and takes a maximum of ten days to fund the project.
- Less paperwork: Unlike traditional banks, hard money lenders require fewer documents. For a conventional bank, your credit history and other documents are a determining factor in whether to approve your loan application or not. But a hard money lender does not consider your credit report and other documents much; their major concern is the equity in the property. In case the borrower defaults on the loan, the hard money lender has the right to seize the property, sell it, and recover the loan amount.
- Easy to apply: Applying and qualifying for a hard money loan is easier as it does not require a lot of paperwork. Also, reviewing fewer documents saves a lot of time. That is why most hard money lenders approve your loan application within 24 hours, and the fund transfer will take only a few days.
- Flexible loan terms: All the banks have certain sets of rules that apply to all their customers, but when it comes to a hard money lender, their loan terms are flexible. Borrowers can negotiate on the interest rate, repayment schedule, cost, fees, and other loan terms. Also, some of the factors vary from project to project. If you successfully complete some projects with the hard money lender and establish a positive relationship with them, they will become more flexible in terms of their services.
All these properties of a hard money loan attract investors who are looking to finance their project quickly. As hard money lenders do not advertise themselves like banks and other financial institutions, you may wonder how to find a hard money lender.
Lets find out below the best way on ‘how to find a hard money lender’.
How to find a hard money lender?
By looking at the properties of hard money loans, you will surely want to reach out to hard money lenders to fund your real estate project. Here are some of the pro tips that you can follow to find a hard money lender:
- Search online: We live in the information age where you can get any information at your fingertip just by tapping a few buttons on your device. So your internet browser would be a good place to begin your search for hard money lenders. When you start your search for a hard money lender online, you will get two things: an individual company and a compiled list of all the lenders in your area. Review and evaluate them one by one to find the best hard money lender among them.
- Be a part of the real estate association: You can reach out to several hard money lenders by attending the meetings of the local real estate community. Almost all lenders want to build a network with their prospective borrowers. Try to create a positive relationship with all the hard money lenders you meet. Ask for recommendations on which hard money lenders to use.
- Create a real estate professional network: All the real estate professionals, including hard money lenders, agents, investors, and many others, are good sources for finding hard money lenders. Experienced professionals have an extensive real estate network, and they can connect you to various hard money lenders. You can ask for recommendations from these professionals about other hard money lenders whom they know or with whom they have worked with.
- Social media platform: Social media platforms are a great way of connecting businesses to their prospective customers. Businesses are using social media platforms including Facebook, Instagram, and LinkedIn to spread the word about them and to draw the attention of their potential customers. You can use these platforms to find the hard money lenders who are present out there.
These are some of the ways to reach out to hard money lenders. But remember, it’s not about only finding hard money lenders; it’s about finding a ‘good’ hard money lender. When you search for a hard money lender either online or by recommendation, you will find a number of hard money lenders. You will have to evaluate each one of them to find the best among them. You can evaluate them based on the following parameters:
- Reputation: You can avoid scammers by contacting a reputed hard money lender. Go through their website and check the reviews of their past clients. Although online reviews are somewhat unreliable, it is better to ask around and get feedback about that particular hard money lender along with reviewing online.
- Funding speed: The best hard money lenders have an easy application process. They will not make you wait longer to fund your real estate venture. A lender who can fund you within one week or a maximum of 10 days can be considered the best.
- Flexibility: A good lender works closely with their clients and offers them customized solutions.
If you are working in the real estate market as an investor, a hard money lender is the best financial solution for you as you need money quickly. When you look for hard money lenders, real estate professionals and online searches can be a good source for finding them. They will help you connect with a number of lenders, among which you need to choose one that can prove to be the best partner in your real estate venture. You should evaluate them based on their services and reputation to avoid scams. Once you start working with a hard money lender, try to build a positive relationship with them. Hard money lenders are flexible and do not follow a certain set of rules. That is why they can give you more benefits in terms of their services if you earn their trust and successfully complete some projects with them.
