Real estate investors can finance their investment properties with debt, equity, or a combination of both. However, there are many reasons why real estate investors go the debt route and seek out loans for their investment properties. Despite the higher interest rates associated with these loans, as compared with owner occupied, here are 3 reasons real estate investors decide to go with leverage:

1. Quick Loan Fundings: A typical hard money loan can close and fund in between 5 to 14 days. In contrast, a bank loan can close and fund in an average of 21 to 45 days. For a real estate investor who must move quickly to take advantage of a good price on a purchase, quick loan fundings are so important.

2. Lower Qualification Requirements: Because hard money lenders are willing to make loans against properties with low or no occupancy, it allows real estate investors to buy undervalued assets and stabilize them, taking advantage of the upside.

3. Opportunity Cost: To have all of their available cash tied up in just one asset would be unthinkable for some real estate investors. Investment property loans allow these investors to make their own cash go further, and thus, many of them were able to pick up a larger number of distressed assets during the Great Recession.

Have you had an experience where a hard money loan or other investment property loan was crucial to your on a real estate transaction? Please share.

Posted by Corey Curwick Dutton, Hard Money Lender