Hard Is Not Really Hard!
Hard money loans can be best defined as the real estate investment loans that are available when all the others show you only the exit door.
After the 2008 recession, real estate investment in foreclosed properties geared up; thanks to the deep discounts that such properties became available at. No matter how promising this venture may be, obtaining a loan for one of these properties can be extremely tough. Bankers and lenders are already burdened with unpaid loans and innumerable foreclosures, they may not be open to risking further loans in €uninhabitable€ properties.
Private money loans, also known as hard money loans or bridge money are the best solution at this time.
Who are these?
Often, investors believe that hard money lenders are those who take strict action if you do not pay the loan on time. This is not true. Yes, their interest rates are high, and they have a set of fixed terms and conditions to be followed. However, it is worth it. For, the biggest benefit of hard money loans is its timely availability and the ability to borrow funds towards the rehabilitation expenses.
Benefits:
€ Investing in foreclosures is indeed a profitable solution for real estate investors. For, timely availability of finance can make or break a deal. Hard money loans are processed in a period of 48 hours to a week, while conventional loans are sometimes processed within a month.
€ Conventional loans do not cover the renovation expenses. Here, the buyer needs to make 20-25% down payment to acquire the property and then shell out money from his pocket towards the rehab charges. As hard money loans cover the purchase price and the rehab expenses, the buyer might have to invest only 10% of the total cost from his pocket.
For instance: Private money lenders provide almost 60-70 percent of the total after repair value of the property as private money loans. Let's say the property in question is available for $50,000 and the repairs cost are estimated at $20,000. The after repair value is estimated at $100,000. Investors can easily expect to acquire a loan to the extent of $65,000. Therefore, the investor needs to shell out only $5,000 from his pocket.
In conventional loans, the investor would have to spend $30,000 (20 percent of 50,000 plus 20,000 repairs cost).
€ After the property is structurally rehabilitated and enhanced cosmetically, the homes value has certainly enhanced the bottom line. Let's say the after repair value of the property is $100,000. Investors can then opt for a permanent loan from the conventional lenders. Conventional financers often provide up to 75 percent of the property value. In this case, the loan amount could be $75,000. The investor can then clear the previous loan and pay the interest.
Private money loans are a great source of financing for real estate investment. There is a huge rush for promising foreclosed properties. Banks and lenders prefer cash on sale. Hard money loan is the answer to ready finance.
After the 2008 recession, real estate investment in foreclosed properties geared up; thanks to the deep discounts that such properties became available at. No matter how promising this venture may be, obtaining a loan for one of these properties can be extremely tough. Bankers and lenders are already burdened with unpaid loans and innumerable foreclosures, they may not be open to risking further loans in €uninhabitable€ properties.
Private money loans, also known as hard money loans or bridge money are the best solution at this time.
Who are these?
Often, investors believe that hard money lenders are those who take strict action if you do not pay the loan on time. This is not true. Yes, their interest rates are high, and they have a set of fixed terms and conditions to be followed. However, it is worth it. For, the biggest benefit of hard money loans is its timely availability and the ability to borrow funds towards the rehabilitation expenses.
Benefits:
€ Investing in foreclosures is indeed a profitable solution for real estate investors. For, timely availability of finance can make or break a deal. Hard money loans are processed in a period of 48 hours to a week, while conventional loans are sometimes processed within a month.
€ Conventional loans do not cover the renovation expenses. Here, the buyer needs to make 20-25% down payment to acquire the property and then shell out money from his pocket towards the rehab charges. As hard money loans cover the purchase price and the rehab expenses, the buyer might have to invest only 10% of the total cost from his pocket.
For instance: Private money lenders provide almost 60-70 percent of the total after repair value of the property as private money loans. Let's say the property in question is available for $50,000 and the repairs cost are estimated at $20,000. The after repair value is estimated at $100,000. Investors can easily expect to acquire a loan to the extent of $65,000. Therefore, the investor needs to shell out only $5,000 from his pocket.
In conventional loans, the investor would have to spend $30,000 (20 percent of 50,000 plus 20,000 repairs cost).
€ After the property is structurally rehabilitated and enhanced cosmetically, the homes value has certainly enhanced the bottom line. Let's say the after repair value of the property is $100,000. Investors can then opt for a permanent loan from the conventional lenders. Conventional financers often provide up to 75 percent of the property value. In this case, the loan amount could be $75,000. The investor can then clear the previous loan and pay the interest.
Private money loans are a great source of financing for real estate investment. There is a huge rush for promising foreclosed properties. Banks and lenders prefer cash on sale. Hard money loan is the answer to ready finance.
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