Growing Real Estate Portfolios with Hard Money

Hard money is a term used to describe a non-traditional lender that uses the property to secure a loan, instead of a person or entity. Since government programs do not back these loans, the interest rates typically range from 12- to 20-percent. Additionally, hard money lenders charge an average of one to five points, which equals one-percent per point for loan financing. These costs are often wrapped into the loan.

Why do people find themselves in a position that requires them to use a hard money lender over a traditional bank? Since banks are more concerned with financing the person, they often loan less money. Hard money lenders focus on financing the property, which means they often loan up to 65-percent of after-repaired property values (ARV).

In fact, the significant benefit of using a hard money lender is that real estate investors are able to purchase real estate properties that are worth 65-percent or less of the ARV, which means that they can essentially get a deal for zero money down. Since hard money lenders focus on the investment property instead of the person, they are easier to work with than banks, are subject to less rigid lending guidelines and are not concerned about personal credit ratings.

Hard money lenders offer real estate investors an alternative to traditional bank financing. After investors are able to rehabilitate and flip a few properties, cash flow should be healthy, making it easier for them to obtain traditional bank loans.

Furthermore, there are several other benefits to using hard money lenders:

• Speed – Real estate investors know that purchasing the latest market deal requires fast action. This means that hard money lenders need to respond to borrowers within a day. Fast loan funding is an absolute necessity, as this gives investors the edge when presenting low offers that may not be appealing to sellers. If loans can close within days, instead of months, this is a benefit of accepting a lower offer.
• Flexibility – Since direct lenders are not subject to stringent loan requirements, they have greater flexibility when loaning on properties. While banks heavily analyze the person obtaining the loan, hard money lenders focus on the property’s potential.
• Pricing – Generally, hard money lenders offer competitive pricing within the industry. Depending upon the type of real estate transaction, loans may require full payment within months or years.
• Red Tape – With minimal red tape, hard money lenders strive to focus on efficient business practices. Without government bureaucracy weighing them down, they have the flexibility to help real estate investors prosper.

Better Than Loans is a hard money lender that offers bridge loans, commercial building loans, apartment building loans and fast money lending. As a direct lender they are able to provide fast loan funding for a variety of real estate transactions.