What is a Hard Money Loan for Real Estate? 

There are many types of financing options available for residential real estate transactions. But, the choices narrow considerably when it comes to multifamily and commercial properties. That’s simply because these parcels and improvements cost a lot more. And, the more money loaned, the bigger the risk. So, there are fewer financing options available to investors and business owners. However, there is one alternative which offers some key benefits -- they’re known as hard money loans.
What is a Hard Money Loan for Real Estate?
If you’re new to hard money loans or haven’t heard the term before, you might wonder exactly what these are and how they work. Well, put in a straightforward way, hard money loans provide financing from a group of individual investors or an enterprise entity. In other words, people put their cash in a fund to loan out. This gives investment property buyers and business owners access to funding without having to go through a traditional commercial lender. Of course, this means these work quite differently from traditional debt instruments.
Hard Money Loan Advantages
The great thing about hard money loans is they usually don’t require a credit check. But there are more benefits. Before we delve into the pros, let’s take a quite look at hard money loan downsides.
Hard money loans are not as abundant as traditional commercial loans. They also come with a slightly higher interest rate. And, most require some form of collateral. But, these considerations are greatly outweighed by the benefits of hard money loans:
  • Rapid funding. Because of the source, there’s no need to wait for weeks or months to receive financing. It’s generally available in a very short amount of time and that allows property investors to act fast to secure a property purchase.
  • Flexible payment options. Unlike traditional financing, you’ll find quite a bit of flexibility. It’s common for borrowers to customize their repayment plans when getting a hard money loan.
  • Fewer approval requirements. Usually, you’ll need just a few things to qualify. As mentioned, you’ll need collateral, which can be in different forms. Additionally, borrowers must have an exit strategy in most instances. But, there are also fewer or no credit requirements for hard money loan approval.
  • Great for short-term propositions. Hard money loans are not for long-term financing. But, that makes it great for commercial and multifamily because it’s typically the case borrowers only need short-term options.
Another advantage of hard money loans is these are an ideal funding source for deals deemed too risky by legacy banks and lenders.For more information about Hard Money Loans in Texas, please contact us, http://www.proactivelendinggroup.com

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