Seasoned real estate investors understand that a hard money loan is often the best way to borrow money for many types of real estate transactions. There are numerous hard money advantages and benefits, the most obvious being the speed and ease of approval and funding for the borrower.
Conventional lenders such as banks and credit unions can have a lengthy application process and then take up to 45 days or more to fund the loan. The hard money loan approval process can be completed within a day in many situations and hard money loans can be funded within a few days if absolutely needed.
There are additional hard money lending tips and advantages that real estate investors aren’t always immediately aware of.
Negotiating a better purchase price
Property owners in a rush to sell their property may be willing to negotiate on price if it results in the purchase closing quickly. Hard money loans can fund much faster than conventional loans and thus can have a shorter escrow period.
Hard money financing is often the preferred method for financing a house flip as the hard money lender can quickly approve and fund the real estate investor’s loan request. A seller with a property in need of repair who is looking for a quick sale may be more likely to accept a hard money loan offer with a slightly lower purchase price knowing the deal can be closed at a faster pace and with fewer complications.
Have an offer be accepted over other bids
An offer with hard money financing has an advantage over offers with conventional financing. Hard money loans fund must faster than bank loans and aren’t susceptible to the same type of delays and problems that can cause a delay in escrow closing or prevent the deal from closing at all. A seller who needs to close as soon as possible with as few issues as possible will likely choose the hard money financing offer.
Have a real estate expert examine the property and project
Hard money lenders are in the business of the funding successful loans and real estate projects. Providing hard money financing for a toxic property or project is the last thing a lender wants to get involved in.
Prior to providing the hard money loan, the hard money lender is going to look at everything involved and try to identify any potential pitfalls that may cause issues for the real estate investor and the lender. The hard money lender may come across an important issue that the investor may have missed. Banks are often primarily concerned with making sure all the numbers and ratios for the loan meet their requirements.
Getting additional input from another real estate expert is invaluable. This can potentially save a real estate investor from losing hundreds of thousands of dollars by preventing a bad deal before it starts. This can prove to be one of the more valuable hard money advantages.
Raising cash quickly to capitalize on another opportunity
The best way to borrow money quickly when the borrower already owns real estate with equity is to obtain a cash out refinance hard money loan. The loan can be approved and funded within days, giving the real estate investor the ability to take advantage of another investment quickly.
This article presented only a handful of hard money lending tips and benefits borrowers are able to take advantage of when using a hard money loan. For more information on hard money loans see our Beginner’s Guide to Hard Money Loans article