The term hard money scares many investors. Some think it is an illegal credit facility while others view it through the eyes of exploiters. While there are some culprits who exploit lenders with unimaginable interest rates, this is not always the case.
However, the bad lenders are giving this sector a poor reputation. Many real estate investors are losing prime deals due to lack of a way to finance them. Others do not want go the hard money way for the fear of the unknown.
Do not be among them. Hard money can be your rescue when requiring urgent cash for a flip and flop or buying a certain property. But why should you consider them? Here are the benefits of using hard money to finance your real estate projects:
- Accessible and fast processing rate
One advantage of hard money credits is accessibility. You can access your desired loan amount within few days. A hard money lender do not work like the banks where you will need to wait for weeks or month before loan approval and processing.
All they require is ensuring that you have the property you are intending to use as a collateral. With this, you will get you loan processed and settle the intend objective.
- Limited requirements to qualify
Naturally, loan processing and approval is a long procedure. It involves several stages before determine whether you qualify or not. For instance the financial institutions will assess your creditworthiness, determine the value of the collateral, and other loan aspects. This process can take even six months before completion.
For hard money, the case is different. Lenders interest is your collateral. They assess the asset you want to use as the security and go on to process the loan. With the few requirements, you get the cash within the desired period and avoid losing prime deals.
- Flexible lenders
Things sometimes go amiss. Your plan might not go as planned. For instance, you might have taken a long for a flip and flop purpose. You do the renovation and put the property on sale. However, it takes time than expected to get a buyer.
Such a scenario can impact your loan repayment plans. Since you are dealing with the lender one on one, you can negotiate the way forward. Also, there is an opportunity to get better loan and interest rates. For example, you can agree on a long-term loan with favorable interests. This will allow you to plan your future well. So, it is a good option to keep you going in the real estate and commercial investments.
- Convenient lending terms
Lending terms is another lesson why hard money loans can be a good idea. The lenders use a different approach to determine the amount they will lend you. Banks and financial institutions use current value estimates to decide how much you worth as a loan. On the other hard, hard money lending companies use future value of the property.
In this essence, the latter will offer you a huge amount depending on the potentiality of your property. The lenders can finance your entire project which is not the case with banks. So, this type of lenders offer convenient loan terms that will favor your venture.
- Opportunity for long-term working relationship
Working relationship is important in every aspect of life. Establishing strong business relationship enable you to get better deals and retain clients. But this does not always work in the financial sector. Despite your level of relationship, financial institutions always check the risk factor in determining how much to lend you.
The case is different in the hard money world. Here, your relationship pays. The lenders will offer good terms and loan amounts after developing a strong working relationship. They will be comfortable with your venture and investment options. So, your relationship building efforts can guarantee you financing for multiple projects without much hassles.
As you can see, hard money loans are not always evil. They can become your investment lifeline even when your credit scores are poor.
