Investing In Hard Money Loans – Hard Money Lenders Explained – How To Properly Find & Utilize Them
Investing In Hard Money Loans – How to Choose
Many people have misconceptions about hard money lenders. We’re going over what exactly they are and why they’re important.
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When I became a Realtor in 2010, I had never heard of hard money lending in my life. I thought if you wanted to buy a home you had to get a 30 year loan with a big bank or pay cash. I never realized there were so many other ways such as hard money and seller financing. Because of that, I never attempted to flip houses because I couldn’t qualify for 30 year loans and I didn’t have cash.
Once I learned about hard money lending, that all changed. I immediately started finding deals and getting hard money loans to do my first flips. Fast forward to today and we still utilize hard money lenders.
The first thing to know about them is that they’re much different than traditional banks. They care more about the deal than they do the borrower. A traditional bank cares more about the borrower than they do the deal. In a hard money lender’s point of view, if you default on a good deal, they’re going to get a really nice property.
The benefits of hard money lending include quick financing in typically 7-10 days. This makes it able to compete and be almost the same as cash. They will also fund as many good deals as you can bring to the table as long as you can cover the down payment and interest payments.
The downside is they’re extremely expensive. Typical interest rates range from 9-12% with points. Points are an upfront fee that is immediately paid to the lender. One point would equal 1% of the loan amount. Also, hard money loans are typically only 6-12 months long. Though the costs are higher, as long as you account for them in your offer then you will be fine.
If you’re looking for a hard money lender the best place is Google. You can search for national and local lenders. National ones will be cheaper but more strict. Local ones will be more expensive but have more flexibility. It really depends on what you’re looking for.
Hard money is a great tool for house flippers. Most people doing volume use them to help scale their house flipping business.
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