Do you know when choosing hard money loans is best? Although they’re not ideal for every situation, there are times when no other form of financing works quite as well.
Hard money loans, also referred to as private money, can make a world of difference in certain circumstances. If you’re exploring your financing options for a project, knowing the benefits and when they perform best can help ensure your plan gets off the ground fast and finishes on schedule, all while keeping your expenses as low as possible.
1) Fix-and-Flips: One of the most common uses for private money is home rehabs. Investors prefer it because they can get cash in hand fast and properties face less scrutiny then they might with other forms of lending.
2) Fix-and-Holds: Many investors prefer to build up a portfolio of rentals rather than turning property around fast. While traditional loans still work well for this, they can’t always be processed fast enough and sometimes homes don’t qualify for them based on their condition. With fix-and-holds, people generally get a traditional loan at some point down the line, perhaps when good terms are available or when the rehab is complete.
3) Construction Loans: Because hard money loans require interest-only payments they can make it easier to keep more cash on hand throughout the construction process.
4) Credit Issues: Traditional forms of lending worry about all kinds of things, especially the borrower’s credit. With private money, the greatest concern is usually the value of the asset, followed closely by the plans to enhance the value. For this reason, people with poor credit and even bankruptcies may be able to get financing.
5) Speed Concerns: There are many situations in which time is of the essence. For example, potential buyers may only have a small window of time to secure financing in order for a deal to go through or they may want to try to sway a seller by demonstrating they’ve got cash ready to go.
Realistically, there are pitfalls with every type of lending. Sometimes it’s hard or impossible to get a traditional loan while others the wheels simply turn too slow. This isn’t seen so much with hard money loans. On the other hand, private money lenders usually have short terms for borrowers and interest-only payments are made, so it’s not usually a good fit for someone who plans to keep their property and not refinance or sell within a couple of years.
Knowing which type of financing is right for a project depends on what’s being financed and what the borrower’s exit strategy is. If your primary concerns are speed or getting approval despite self-employment or credit status, private funding could be right for you. The best way to find out is to complete a free application and then review the terms offered. Contact us to get started today.
Level 4 Funding LLC
Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.