Hard Money Loans: 5 Benefits to Property Investors
When dealing with real estate, time is of the essence. A hot property will go fast, so having the funds to purchase it quickly is important. However, traditional loans from the bank can take weeks to be approved. In real estate, property investors need financing to be approved in a matter of days. One option for real estate investors is to seek out hard money loans. These loans are short term, anywhere from 12 months to 5 years, and are financed by private lenders. There are several reasons that this type of loan is desirable to investors and here are a few of them.
Ineligible for Conventional Loans
Many banks will limit the number of conventional loans a single person can have. In most cases, this magic number is four financed properties. If an investor is wanting to purchase a fifth property, the bank will not even consider granting a loan simply because the investor is maxed out. Hard money lenders do not take the number of financed properties the investor already has into consideration. Thus, a hard money loan could be granted in this situation.
Receive Funds Quickly
Hard money loans can be financed very quickly. In five to ten days, and in urgent cases it can be even quicker, the funds are available for the investor to use. This makes closing in on hot deals achievable.
Power to Negotiate
With the ability to have financing ready in a matter of days, investors using hard money loans have the power to negotiate. Sellers who are desperate to sell are more likely to negotiate a lower price with a buyer that can close quickly rather than wait around for a higher price and longer closing process.
A hard money offer on a property is a much stronger offer than conventional loans and experienced sellers and agents are aware of this. Hard money loans come in fast and are much less likely to have last minute issues that prevent funding during escrow.
Keep the Cash
While using cash for purchases can be good idea, there are drawbacks to it as well. Cash is a necessity for some instances and having it all tied up in investments can be dangerous. Using hard money is a better alternative than a conventional loan that allows the investor to keep cash available for emergencies.
Investing in real estate requires fast action and fast funding. Hard money loans can provide the financing that is needed to close in on valuable property.