3 Interesting Facts About Hard Money Loans
Imagine that you have found the perfect real estate investment opportunity. All of the numbers line up, and you potentially stand to make a lot of money on the deal. When the bank calls about the loan, it is bad news; the bank is not willing to loan you the money you need for the project. If something similar happens to you, do not give up on your real estate investment dreams. It may be time for you to investigate hard money loans. These loans originate from private investors and are sometimes easier to obtain than bank loans.
If you have bad credit, obtaining a loan from a bank may be nearly impossible. A bank has to answer for every loan that it makes. Any risk factor that makes the loan questionable will generally halt the loan in its tracks. With hard money loans on the other hand, the value of the property that the borrower wants to purchase is usually the deciding factor. If the property is a great investment with a big potential for earning substantial profits, a private investor may see the value of extending a loan. The property being purchased is put up as collateral, so if the borrow defaults, the lender can foreclose.
Private investors like to loan money for projects that have a good chance of succeeding. One type of deal they seem to be fond of is building on property that already has some improvements. The land is made more valuable with the addition of features such as drainage, electrical access or road development. In fact, almost any preliminary additions to the property that make it more valuable can help it qualify for hard money loans. The borrower’s plan to up the land’s value even further by building on it can make it an attractive deal in the site of a private lender.
Another type of property that private investors sometime like to fund are when the buyer plans to repair the property and resale it. Buyers who are in the business of fixing up properties to “flip” usually can provide the lenders with a detailed analysis of how the venture will earn a profit. This is the type of data that lenders usually like to see. Borrowers who can show on paper exactly how the property will be improved to increase its earning potential usually stand a better chance of receiving a positive response. Private individuals who make hard money loans usually require that their investment will be as near a sure thing as possible.