Is A Hard Money Loan Right For New Investors?

Becoming a real estate investor can be an exciting venture. Real estate investment is a great way to enhance your portfolio of investments and provide yourself with a source of passive income. The real estate market is booming and now is the time to jump in and make your first strategic purchase. Before you do, consider whether a hard money loan is right for you.

What is a Hard Money Lender?

A hard money lender is a non-traditional lending source. Essentially, instead of acquiring funds from a bank to make an investment through a traditional loan process, a hard money lender is a private lender that offers individuals the ability to take out hard money loans, or private loans. The money you receive is not from a bank, it is from an individual, a group of individuals, etc, that provide the money instead of gaining it from bank depositors.

How To Apply For a Hard Money Loan

In order to apply for a hard money loan with EMCAP Lending, you will need to be a builder, flipper, investor, or real estate developer. As an applicant you should be looking to invest in a property that is not owner-occupied and is either single-family, multifamily, mixed-use, or commercial. You  must also be comfortable with a 12-18 month loan term. For this specific lender, applicants should be located in Massachusetts, Florida, New Hampshire, Rhode Island, or Maine.

Do Hard Money Loans Require Collateral?

Hard money loans do require collateral. Collateral is the equity, or potential equity of the real estate in which you are investing. Without this collateral, an applicant will be seen as a potential risk. It is also important that an applicant has borrower-friendly credit. This provides the lender with the confidence they need that they will be paid back for the hard money loan.

Benefits of a Hard Money Loan

Some people are wary of hard money loans. While it is okay to be wary, it is also important to know that there are many benefits to using a hard money loan over a traditional loan. That is because a hard money loan is typically less of a hassle than a traditional loan. This is beneficial for those looking to close on a deal quickly to get prime investment space.

Who Uses Hard Money Loans?

Due to their convenience and quick processing, hard money loans are popular among many people. Investments are made to  people from all walks of life. Builders, landlords, commercial enterprises and anyone who meerts the hard money loan criteria and has a viable real estate investment pending.

Let’s Not Forget Fix and Flippers

Hard money loans are commonly used by house flippers in order to finance their projects. Basically, house flippers are people who buy a property that is in need of repair and turn it into a profit at the time of sale. Hard money, or Asset Based loans are popular with them because they can repay these loans within one year, removing the need to finance a house with a 15-year mortgage.

More About Builders

Builders often use hard money loans when buying empty lots. This is because they can buy the lot, build the house relatively quickly and pay the loan back within one to two years. This is convenient so they are not locked into a long-term mortgage with an early payment penalty.

Real Estate Investors

It comes up from time to time that a real estate investor finds a property for a steal of a deal that they have to grab as quickly as possible. In the case of a real estate investor lacking the cash on hand to purchase the asset, a short-term loan can be processed very fast by a hard loan lender.

Hard Money Loans: A Good Investment

When you are a real estate investor looking for alternative lending options, applying for a hard money loan is a good idea. When you choose the right hard money lender, they are quick and painless to acquire. So take the leap if you feel it is the right option for you. 

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