Why Use Hard Money Loans for Real Estate Investing?

Have you started thinking about joining the world of real estate investing? It can definitely be quite a profitable venture, so it is no wonder that you’re considering this option. Perhaps you may have even done some research on the different investment strategies, and perhaps you’ve settled on the right one for you, understanding its specific benefits. So, there’s only one thing left to do. Invest.

Yet, as profitable as this venture can be, there’s no denying the fact that it also often requires significant capital to get you started. So, you will most likely have to carefully consider your options, aiming at finding the perfect one for you. This, among other things, means that you should learn more about hard money loans, as those have proven to be quite useful for real estate investors. Understanding what these are and why you should use them to your advantage could undeniably help you on your investment path.

Well, those are clearly the questions you now have on your mind. Most importantly, you want to understand why using hard money loans for real estate investing is such a good idea, as that’s how you’ll get to decide if you want to do it or not. Let us, therefore, talk about that in a bit more detail.

What Exactly Are Hard Money Loans?

Before we get to that part, though, we have to make sure that you understand what hard money loans actually are. In a few words, we are talking about a short-term financing solution – that is, a short-term asset-based loan that is offered by private lenders. The fact that it is asset-based means that it is secured by real estate, which further means that it is evaluated based on the value of the property you’re buying rather than your specific credit score and creditworthiness.

These are particularly useful for investors because they come with shorter terms. Of course, they also come with slightly higher interest rates than the traditional solutions, but those are often rather worth it, not only thanks to the short terms but also thanks to such flexibility and the more lenient terms of getting approved. In short, they offer great strategic advantage to investors, which is definitely a big deal.

Here’s more on what this financing solution entails: https://en.wikipedia.org/wiki/Hard_money_loan

Why Use Them for Investing in Real Estate?

Now that you understand what hard money loans are, the next thing you want to do is get a clearer picture of why you should use them for investing in real estate. There are, as you will see, several reasons why this is a good idea. So, let us check out some of them and thus help you figure out if this is something you want to rely on during your investment journey.

• Quick Access to Funds

First and foremost, hard money loans provide you with an opportunity to quickly get the money you need. Thus, when you stumble upon a great investment opportunity, you won’t have to worry about not having the funds to grab it. Instead, through this solution, you will absolutely be able to get the money quickly and thus snatch that opportunity before someone else does. Traditional loans take weeks, or even months, to be processed, but this one is completed in a matter of days. It cannot get any faster than that.

• Less Strict Process of Approval

A lot of people think that they cannot join the world of real estate investing simply because one thing or another has taken a toll on their credit score. And that can be quite frustrating. Yet, as frustrating as it is, the truth is that you don’t have to worry about your credit score since there is a different solution that can undoubtedly help you secure the finances for investing, even if that score is quite low.

Naturally, I am referring to hard money loans. The process of approval is much less strict when compared to traditional loan options. This is because it is not your credit score that plays the major role but the value of the property instead. The loan is secured with that property, so it is its value that will dictate its terms, meaning you can secure the financing even with a poor credit score.

• Gain a Competitive Edge

As you may have understood already, getting a hard money loan can help you gain a competitive edge on the market. How come? Well, it’s pretty logical. Basically, this option allows you to easily grab amazing, lucrative opportunities and do so quickly without worrying that a more agile buyer will snatch it away.

• Take on Riskier Projects More Confidently

Finally, here’s what you should know as well. With this option, you can easily take on some riskier projects, such as, for example, buying properties that are not in great condition in order to fix and flip them. Traditional lenders are usually not keen on providing financing for such properties. But, the private ones are, thus, providing you with access to some unique projects and opportunities.