Why Hard Money Is The Ideal Financing For Real Estate

Why Hard Money Is The Ideal Financing For Real Estate

Hard money interest rates are twice as high compared to traditional loans but it is still considered as the best form of financing when it comes to real estate investing. Hard money financing has many advantages over traditional loans despite the higher interest rate and this is why it is in demand among house flippers.
The first advantage of this form of funding is that it is processed much faster. Banks and other traditional lenders usually take at least 30 days to process loan applications. Hard money loans on the other hand are approved or rejected in just a matter of days. In some established online networks like RehabHardMoney.com, it takes at least two days to process applications after the submission of papers. Rehab Hard Money also uses a prequalification system that further speeds up the processing of loans.

Second, hard money financing can fund repairs in a fixer upper project. Traditional lenders will only lend you the amount to buy the property, for instance a fixer upper home. Hard money loans, meanwhile, can cover the repair costs since these are computed based on the ARV, or after repair value of the property. For example, you will buy a fixer upper home for $90,000 and spend $15,000 for repairs. If the lender will give you 70% of the ARV, you'll get $150,000 - the same amount you'll need to buy and repair the property. That means you will be able to flip a house without spending a single cent.

Third, hard money loans are approved based on the "collateral." The fixer upper you will flip is the collateral here. If the lender sees the property's potential to yield profits, then you'll get the loan. Your credit score will barely matter when you apply for such loans.

Such is the case when you search for lenders through web sites like RehabHardMoney.com. Rehab Hard Money has a network of lenders across the country. You'll be able to prequalify for loans by filling out a borrower's form on the web site. Rehab Hard Money also entertains lenders who want to join its elite network.