11 Benefits of Hard Money Financing
Did you know that the average person in the United States of America has more than $90,000 in debt? A lot of debt in the United States is related to student loan debt associated with attending a college or university. Many people also tend to go into debt in order to finance a car or purchase a new home.
Hard money financing is a great option if you’re looking at buying or building a home in the near future, as it is one of the most reliable financing options if you want to fix up a home and flip it for a profit. You’ll have a number of financing choices to make if you have a strong credit score, but that doesn’t mean that you should eschew financial planning.
The good news is that you’ve come to the right place to learn all about hard money and the benefits that it will provide you. Keep reading to learn about the 11 hard money financing benefits today!
Easy Process for Financing Application
Some financing options make it as difficult as possible for you or people like you to apply for financing. When it comes to hard money financing, the application process is straightforward and easy for anyone that wants to apply. Try applying for a mortgage and you’ll realize how complicated and tedious the process gets in a hurry.
The same could be said for applying for financing options with a bank or a credit union in your area. They’ll ask you to fill out a ton of paperwork that is confusing and complicated. It isn’t abnormal for people to decide not to apply for a mortgage after seeing the mountains of paperwork that they’ll need to fill out.
Looking at financing options for hard money loans is a walk in the park compared to your other options. The lenders are more interested in the value of the property that you’re looking to purchase and the renovation plans that you’ve come up with for it. They’ll also want to know if you have a history of other similar investments to this one.
Get Your Funds Faster
Another big benefit that you’ll gain with hard money financing is the ability to get your money in a short period of time. Investment properties are often some of the most in-demand properties on the market. If you find a perfect property that is below the set market value then it is normal to want to pounce on your opportunity.
Most people that want to buy properties to fix them and then flip them will pay in cash. If you want to compete with these other potential buyers then you need to have cash in your hands and ready to go. Lenders in the hard money industry don’t need to see a bunch of paperwork or your credit score to determine if they’ll help you with money financing.
You’ll get approved for the loan much quicker when you choose to go with hard money over loans from a bank or financial institution. Going through a bank will result in waiting up to a month to get your money, and by that point, your dream home could be off the market.
You’ll also face less risk if you choose to go with hard money financing over more traditional options like credit unions or banks. The majority of the risk with the money financing lies with the lender rather than with you. The lender is betting that the property will be valuable after you purchase it and move forward with your renovations.
If they make a proper evaluation of the property and the renovation skills of the person they’re lending to then they’re likely to make a profit. Other times, things outside of the control of you or the lender happen, which could impact the value of the property in a big way.
If the property doesn’t end up the way that you or the lender planned then the lender is the person that has the most to lose. This is a great arrangement for you since you get much of the benefit with almost no risk.
You’ll Need Less Savings
Going with hard money financing is also a great idea because you don’t need as much money saved up to get started. It is a wonderful way to break into the real estate industry without having a fortune to your name. Going with 100% hard money financing means that you’ll get started without needing to save $30,000 to $50,000 to take care of a mortgage down payment.
It also gives you the ability to purchase multiple properties in a short window of time. That wouldn’t be possible if you needed to put a large percentage down for the purchase of each home. Many hard money lenders are willing to move forward with “no money down” loans.
At worst, you’ll need to pay around $10,000 in origination fees. Once you get the money from your hard money financing you’re good to move forward with purchasing your properties and starting the renovations. You can use the profits from your first successful flip to fund future endeavors.
Chase Multiple Deals at One Time
If there are multiple properties out there that fit your criteria and that have great potential then you could get stuck in a situation where you have to choose only one. Going with hard money is great because it opens doors for you that allow you to chase multiple properties at one time.
Using traditional mortgage financing means that you’ll need to put at least 20 percent down for each property that you purchase. That will add up quickly and leave you broke. The typical real estate investor doesn’t have the money to finance that so they settle for buying one property at a time.
Using hard money financing will allow you to purchase multiple properties at one time and get started with renovations. It makes your financial planning much easier because you know that you’ll have the money that you need to get more properties.
Get Property With Bad Credit
Bad credit is a difficult barrier to traverse when it comes to making a purchase like a property or home. It is frustrating because it leaves you with limited options for money financing. Many banks and credit unions won’t even consider your loan application if your credit score is below a certain point.
In addition to people with bad credit, self-employed individuals will run into issues getting the money that they need in order to finance the purchase of a home. They might make a ton of money one year and close to nothing the next year.
Traditional money lending options will look at each of these types of people and consider them too risky to lend money to. If you have a large income and a nice portfolio of assets then you’re a prime candidate to work with a hard money lender to finance a new home.
Overcome Restrictions for Bankruptcy
Filing for bankruptcy can be a death knell for your future when it comes to getting approved for a loan. If you’ve declared bankruptcy in your past then financial planning becomes an everyday struggle to overcome.
Not only will you find it difficult to purchase property or buy a home, but it is tricky to find an apartment to rent after you declare bankruptcy. Going with financing choices like hard money financing will open doors for you that you thought were closed for good.
You can get the money that you need in order to start your own real estate business and start renovating homes. It is also a gateway to owning your own home since hard money lenders will provide you with the money to purchase a home.
Real Estate Investment Advice
It is no easy task learning how to invest in real estate on the job. Going with hard money financing provides a number of benefits, and one of the most notable is the investment advice that the lender provides. You need to remember that the lender has more skin in the game than you do.
They’re invested (literally and figuratively) in the success of your real estate endeavors. Many of these lenders were real estate investors earlier in their lives. Odds are that they’ll have a ton of helpful and useful advice for you when you’re looking at purchasing different properties.
Don’t be afraid to reach out to your lenders and ask them for advice about properties that stick out to you. They’ll be more than happy to help you since their success and money are tied to your own.
Lenient Lending Terms
Going to banks and credit unions for your financing options will lead to you running into some stingy lending terms. Hard money financing often offers lenient terms compared to what you’ll get with banks and credit unions when you want to purchase a property.
If you find that you’re struggling to make your payments then you can always approach your lender and see if they’ll come up with financial planning and payment plans that work for both parties. Hard money lenders are willing to work with you but they need you to be open and transparent with them.
Maybe you’re facing delays with supplies due to the pandemic and it is holding up your home renovations. Let your lender know that and they’ll work with you on a payment plan or help you get in touch with other suppliers that can help you. They’ll also help you refinance your loan or draw up new plans depending on the needs of your renovation projects.
Many loans that you’ll get from a bank or a credit union are cookie-cutter loans that work in a one-size-fits-all manner. Going with hard money financing allows you to get loans that are tailored to meet your exact needs. Each investor has different needs when it comes to financing options.
Some investors have a large amount of cash saved up and need to borrow a little bit more in order to make their next investment. Others are working with zero capital when they find the perfect home.
There are certain terms and conditions that banks and credit unions are stuck working within. Hard money lenders can stray outside of those lines to get you the capital and the resources that you need. They’ll assess your loan application and adjust the term lengths and interests rates to fit your needs and finances.
Ability to Negotiate
Since you’ll get your cash in quick succession, going with hard money for your money financing will allow you to have negotiations with the seller of the property that you want. It is difficult to negotiate on a property or a home when you don’t have the money in place to make a purchase.
If a new property goes on the market and it is selling for cash then the seller will often go with the person that can pay the soonest. Working with hard money lenders is the best way to ensure that you’re the person with the money in your hands to make the big purchase.
You’ll have the confidence and peace of mind that comes with knowing that you’ll have the money that you need within the next 24 to 48 hours. You’ll have a leg up on the other bidders since they can’t pay that soon.
Take Advantage of Hard Money Financing
Hard money financing provides a ton of advantages to people that are looking for a way to finance a home or start their own real estate business. Hard money allows you to get the capital that you need in a short period of time while avoiding the big upfront payments that come with traditional mortgages.
You’ll also get to enjoy benefits like customized terms and interest rates, as well as the ability to negotiate with the seller since you have the cash ready to go. Best of all, you’ll have the lender in your corner since their interests and money are tied to your own.
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