It isn’t uncommon to hear mortgage industry insiders refer to hard money lenders as being a final option. While this might be true to the extent that many borrowers who solicit loans from hard money lenders do so as being a last resort, there are many cases in which a hard money lender may be sought before a conventional banking institution. Let’s take a look at some scenarios where Accredit Money Lender can be quite a first stop rather than a last option.
Commercial Real Estate Development – Let’s say a genuine estate developer has sunk $10 million in to a development deal and originally planned to market units in January and would then start to recoup their investments dollars from your project. As is the case with many such endeavors, delays may push back the start sales date or perhaps the project might go over budget, leaving the developer with a cash negative situation. The developer now must take out a bridge loan to get through his cash poor period so that you can “survive” until the project starts to realize a cash positive position. Using a traditional loan, the lender would not push through the loan for your borrower for four to six weeks. The developer would default on his original loan or would not have money on hand to end in the project. The developer needs cash today and oftentimes needs the cash for only a 2 to 4 month period. In this particular scenario, a tough money lender is the perfect partner simply because they can provide financing quickly and efficiently.
Rehab Investor – Another illustration of a hard money scenario is a rehab investor who demands a loan to renovate run down homes that are non-owner occupied. Most banks would run from this loan because they would be unable to verify that the rehabber will probably be capable of promptly sell the units for a profit — particularly with no current tenants to provide rent to handle mortgage. The hard money lender would, in all probability, become the only lender willing to take on this kind of project.
Flipping Properties – Another group who may use hard money lenders as a starting point as opposed to a last resort are real estate property investors seeking to “flip properties.” If the investor locates a house they deem as a great value, they might need quick and secure financing to take buy, renovate then sell the house quickly. Anyone looking to flip real estate fails to wish to hold on to the property for a long time as well as the short term loan from Accredit Money Lender will accommodate this need. The pdkfqq can be structured as interest only, keeping the expenses low. When the property is sold from the individual that is flipping the property, the main pays back as well as the profit is kept or reinvested in to the next project.
A Borrower In Foreclosure –
One final scenario of hard money involves someone who finds themselves in foreclosure. When a homeowner falls behind on their own house payments, most lenders will not give them financing or restructure their current loan. Occasionally, a person who is facing foreclosure will get yourself a hard money loan to prevent foreclosure proceedings and utilize time to promote the house.
The question remains why would hard money lenders loan money if a traditional bank wouldn’t even consider such a g.amble. The correct answer is two fold. First is that hard money lenders charge higher rates than traditional lending institutions. The 2nd is the fact hard money lenders need the borrower to get at least 25-30% equity in actual estate as collateral. This insures that if the borrower defaults on their loan that the lender can certainly still recoup their initial investment.
A hard money loan is basically a marriage from a borrower in a tough spot (either coming from a time sensitive perspective or due to their poor financials) and Accredit Money Lender that is risk adverse and is prepared to take a chance to get a higher return. While hard money loans may be a last option for a lot of, there are plenty of scenarios when hard money is the best way to go.