Every real estate investor knows the value of a good piece of property. The first thing that comes to mind, however, is collecting the necessary funds for the job. Currently, one of the most popular methods of financing real estate projects is through hard money loans. Hard money loans are specific types of asset-based loans issued to potential borrowers. The borrower receives these funds, which are secured by real estate property. Hard money loans are normally issued by private companies.
What Are Hard Money Loans?
Typically, hard money loans are used for short-term needs. These loans are available for as little as thirty days to as long as five years. In contrast to that, conventional mortgages are available for as long as ten to thirty years. However, on a more challenging vacant real estate, it is more difficult to obtain a conventional loan. Because of this, hard money loans are known for being used by real estate investors for new acquisitions.
Example of A Situation Where Private Money Loans Are Convenient
Consider the following scenario; A real estate investor may find the perfect piece of property for sale. However, the property may be distressed with damages and incomplete in repair. Because of this, conventional mortgages become more difficult to obtain due to the distressed, vacant real estate property. When this happens, the investor may be faced with two options:
- Receiving the funds from someone who is well-known to the investor.
- Obtain hard money loans to purchase the property. The hard money loan can also be used for covering the cost of repairing the distressed property.
Once this property has been refurbished and becomes ready for renting, the investor may be able to obtain conventional loans to repay the funds for the hard money loan.
This scenario is a potential consideration for a short-term loan used to purchase the property but for permanent residency, hence the need for traditional financing. For those who have just been introduced to the concept of hard money loans, it is essential to keep in mind that these loans are simply for a short-term basis, not long-term holds.
A Trusted Hard Money Lender – BridgeWell Capital
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