What are Hard Money Loans &
How Do They Work?
Real estate investors looking to purchase an investment property realize that they will require some form of outside financing to receive the necessary funds to complete the purchase of their property. Most investors are not able to pay the full amount in cash for their projects, so they search for creative ways to obtain financing for their deals.
One of the ways that real estate investors acquire the necessary financing for the purchase of an investment property is through a hard money loan. Hard money loans are defined as asset-based financing through which a borrower receives funds secured by the value of a parcel of real estate.
Hard money loans differ from traditional bank financing because they offer greater leverage to the borrower, and they are able to close and fund deals faster than a traditional bank loan.
Investors can pay as little as 10% out of pocket for a down payment for the purchase and rehab of an investment property and can close and receive the loan funds in as few as 3-7 business days.
Real estate investing is a very competitive industry with multiple investors sometimes bidding against each other for the identical property, so the ability to access funds quickly puts the real estate investor at an advantage over their competition.
Leverage is another big advantage that real estate investors have by using private money or a hard money loan. The ability to put down a smaller portion of their own money allows for the real estate investor to buy more properties and do more deals. This provides the opportunity to earn higher profits as well as a greater return on investment.
Top Benefits of Hard Money Loans
Simple Qualification Process
Allows for Multiple Deals