What Are Investment Property Hard Money Loans, Why Use Them & How?

If you are looking to become a real estate investor, or you’ve been one for a while already, there is one thing that you absolutely have to keep in mind. To put it simply, speed matters. After all, if you don’t act on time when you come across a good deal, there is a huge chance that you may lose it to a competitor, which is definitely not a favorable situation for you. Go here to read about some real estate investing strategies you may want to use to your advantage.

Anyway, the fact that speed matters also leads towards another important conclusion. To cut right to the chase, when you need funds to be able to invest in real estate, you will undeniably need to get it quickly. This, of course, means that you will need to find the right financing solution for yourself, because chances are that you don’t really have huge amounts of cash just lying around and waiting for you to spend it on a property.

This is, naturally, where hard money loans come in. Since you are here, it is safe to say that you have heard of this option already, and that you have, thus, become interested in understanding it a bit better. What you want to know, thus, is what hard money loans are, how they work, why you may want to use them to your advantage, as well as how to get a good one, should you decide to do that.

Well, those are all, without a doubt, some quite important questions right there. What we are going to do, therefore, is answer them for you below, in an effort to help you understand everything you need to know about this. And to, thus, help you make up your mind and make the right choice. Without any further ado, then, let us get started.

Perhaps this could also help you understand how these work: https://www.experian.com/blogs/ask-experian/how-do-hard-money-loans-work/ 

What Are Hard Money Loans?

Unsurprisingly, we are going to begin with the very basics here. Put simply, we first have to ensure that you understand what hard money loans are, so that we can then proceed toward helping you figure out why you may want to use them, and how to get a good one. So, let’s cover the basics first.

In the simplest words possible, a hard money loan is a short-term loan that is backed by an asset. This means that it is secured by the property you are buying, which has some interesting implications. Most importantly, it means that your credit score doesn’t exactly play a role in whether you will get approved for the loan or not. Instead, it is the property you want to invest in that will dictate that.

Then, unlike those traditional mortgages, that are, as you may very well know already, funded by banks or credit unions, these work a bit differently. In short, they are funded by private lenders and specialized lending companies. They are typically short-term, and can range from 6 months up to 3 years, but this is a criterion that you have to check with the actual lenders you will choose, because they may all have different solutions to offer. And, given the fact that they are backed by the property, and no extensive credit check is required, you should also know that this means you can get this loan approved in a matter of days.

Why Use Them to Your Advantage?

Now that you have understood what hard money loans are and how they work, you have another question on your mind. Why should you use these to your advantage in the first place? That is, why is an investment property hard money loan a good idea to begin with? It is completely normal for you to wonder this before making any concrete moves, so let me now give you a better idea about that.

First things first, the fact that the loan is asset-backed, and that no credit check is required, means that you can get approved for it even if your credit score is poor, or non-existent. This gives people with a poor score, or complete beginner investors a chance to play the real estate investing game as well. So, if you’re worried about your score, and if you may be unable to get approved for a traditional mortgage because of it, then this is the right move for you.

Furthermore, since the loan is short-term, it means that you will get out of debt quickly. And that is, without a doubt, highly important for investors. Perhaps you want to flip the property you are buying, in which case such a short-term borrowing solution is perfect for you. Whatever you want to do with the property, though, getting out of debt quickly is a huge plus.

Of course, we cannot fail to mention the fact that getting approved, and getting the money for that matter, is a quick process when it comes to hard money loans. As mentioned previously, time is often of essence for real estate investors, meaning that this type of a solution can help you get the funds you need before a competitor actually snatches the property you are after. So, this is a huge plus in itself as well.

How to Get a Good One?

Onto the last question now. Basically, if you decide to get a hard money loan (further about on this page), then you will want to get a good one. And, of course, you want to know how to do that the right way.

The main thing is, as you may have guessed it already, for you to find and choose the right lender. So, research different ones, check their experience, inspect their reputation, and take a closer look at the terms of the loans they are offering, including the interest rates and the repayment terms. Then, compare everything, choose your lender, apply for the loan and wait for approval. As mentioned, you won’t have to wait for long.