It’s not uncommon to hear mortgage industry insiders refer to hard money lenders as being a last option. While this can be true to the extent that lots of borrowers who solicit loans from hard money lenders do so as a last option, there are lots of cases in which a hard money lender may be sought before a conventional banking institution. Let’s check out some scenarios where Accredit Licensed Money Lender might be a first stop instead of a last option.
Commercial Real Estate Property Development – Let’s say a genuine estate developer has sunk $10 million into a development deal and originally planned to promote units in January and would then begin to recoup their investments dollars from the project. As is the situation with many such endeavors, delays may push back the beginning sales date or even the project could go over budget, leaving the developer using a cash negative situation. The developer now have to take out a bridge loan in order to get through his cash poor period to be able to “survive” till the project starts to realize a cash positive position. Having a traditional loan, the lender would not push through the loan for that borrower for four to six weeks. The developer would default on his original loan or will not have cash on hand to complete up the project. The developer needs cash right now and oftentimes needs the money for just a two to four month period. In this scenario, a hard money lender would be the perfect partner since they can provide a loan efficiently and quickly.
Rehab Investor – Another illustration of a hard money scenario is really a rehab investor who needs a loan to renovate run down homes that are non-owner occupied. Most banks would run from this loan simply because they would struggle to verify that the rehabber will probably be able to promptly sell the units to get a profit — especially with no current tenants to offer rent to handle mortgage. The hard money lender would, in all likelihood, become the only lender willing to battle such a project.
Flipping Properties – Another group who might use hard money lenders as a place to start rather than a last resort are real estate investors looking to “flip properties.” If an investor locates a home they deem as a great value, they could need fast and secure financing to take buy, renovate then sell the property quickly. Anyone trying to flip property fails to wish to hold on to the property for a long period as well as the short term loan from https://www.accreditloan.com/ will accommodate this need. The pdkfqq can also be structured as interest only, keeping the costs low. Once the property is sold from the individual that is flipping the home, the main pays back as well as the profit is kept or reinvested in to the next project.
A Borrower In Foreclosure –
The last scenario of hard money involves somebody that finds themselves in foreclosure. When a homeowner falls behind on the house payments, most lenders will not provide them with that loan or restructure their current loan. Occasionally, someone who may be facing foreclosure will obtain a hard money loan in order to avoid foreclosure proceedings and utilize enough time to sell the house.
The question remains why would hard money lenders loan money if a traditional bank wouldn’t even consider this type of g.amble. The reply is two fold. First is very difficult money lenders charge higher rates than traditional lending institutions. The next is the fact hard money lenders require borrower to have a minimum of 25-30% equity in real estate as collateral. This insures that when the borrower defaults on their loan that this lender can still recoup their initial investment.
A hard money loan is basically a relationship from a borrower in a tough spot (either coming from a time sensitive perspective or because of their poor financials) and https://www.accreditloan.com/ that is risk adverse and it is prepared to take a risk to get a higher return. While hard money loans might be a last resort for most, there are many scenarios when hard cash is the only method to go.