Using Hard Money to Purchase Investment Homes

Using hard money can be a good way to purchase investment properties. If you are in the market for an investment home, hard money is something that you will definitely want to consider. Here are the basics of hard money and why it can be beneficial to use when purchasing investment homes.

Hard Money Loans

Working with a hard money lender is different than working with a traditional mortgage lender. Hard money lenders are individuals that have money that they are willing to lend. These individuals typically have restrictions on what you can use the money for. They are going to want to look at of the real estate deal that you are getting involved in. They will tell you the terms of the loan and the interest rate that you are going to have to pay. 

Benefits of Hard Money

Using hard money can be beneficial for a number of different reasons. First of all, you are not going to have to go through the same credit approval process. Hard money lenders do not tend to pay as much attention to credit as traditional lenders do. Hard money lenders are going to pay more attention to the value of the real estate deal that you are getting into. They will want to make sure that they can sell the property if they have to foreclose on it.

Hard money loans are also going to go a lot quicker than what you are used to with a traditional lender. Since you are working with an individual, the decision on the loan is going to come quite a bit faster. You will potentially be able to get your money in a few days instead of multiple weeks. If you have spent any amount time in real estate investment, you know that you need to be able to work fast in order to secure a good deal. 

Structure

When you get a hard money loan, you are going to find that the structure of the loan is different from traditional lending. Most of the time, you are going to be working with an interest-only loan that has a balloon payment at the end. This is going to allow you to have a smaller loan payment during the life of the loan. However, it can be risky because you have to pay off the loan all in one payment at the end. The interest rates on these loans are typically very high as well.

Hard money loans are also traditionally very short in nature. Most of the time, you are only going to be able to get a loan for somewhere between one and three years. Therefore, this is a very short term solution. Eventually, you are going to your have to sell the property or refinance the loan.

Where to Find

You should be able to get online and find several hard money lenders that work in your state. You can also ask for referrals from traditional lenders if you do not qualify for a loan with them. 

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