Hard money loans are good for first time investors as a source for crediting, as more times than not, people in California begin their debt before they even begin their credit, this phenomena comes from the influx of student loans. This could be a good indication of the future success of hard moneylenders. This is usually the case with people who have bad credit or do not qualify for other credit lines or loans.
In our history, and even presently flipping houses (buying a “Junker,” fixing it up, and selling it for profit) has been very profitable, and a good source of making money. It is a market with a huge risk with such big investments but it can be very profitable. This is where hard money loans come in.
These property flippers or investors usually use the hard money loans to buy a property at a low price quickly! The importance of quickness is what makes a hard money loan different than any other loan. Investors sometimes need the money as soon as possible. Conventional loans or typical soft money can take up to 30 days to obtain. Investors are very attracted to our quick and fast delivery, of typically around ten business days. In the case of flipping houses, this is exactly what the investor is looking for. When a flipper finds the property they are interested in, they want their money fast, and sometimes their only option is a hard money loan, if they don’t want to lose the property. Sometimes the hard money loan can make or break a business or even a deal.
The way to make money in property flipping can be a very long project. This can depend on how much the property needs to be worked on. There are a lot of things to oversee before investing or flipping a house, money is obviously an issue. The “flipper” can constantly be asking themselves, “where is the money going to come from?” But, in a troubling financial situation, hard money loans are not a bad place to turn.
Hard money lenders do get a higher interest rate but the risk they take usually overshadows that. Meaning the high interest rate is worth what you are getting. And most people are fully aware of the higher interest rates, and still do turn to this option. In most cases it is their only option. The higher interest rates are given as security though, as those in need of these loans can have potentially bad credit or none at all. Which is a big risk for the company. In the brighter picture it has been proven that hard money lending can save a clients property or be the difference between losing or creating jobs on a site being developed.
Yanni Raz is a hard money lenders and trust deed investments specialist as well as a blogger and contributor. The goal is to educate other real estate investors before they are getting into bad real estate deals.