What Is A Hard Money Loan?

by | BiggerPockets.com

When it comes to securing funding for your upcoming real estate investments, there are a number of different avenues that you can explore in order to find the funding you need.

One of the most popular options for today’s investor is to turn to hard money lenders.

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So What Exactly Is a Hard Money Loan or Lender?

They are companies that loan money to fund real estate investor transactions over a short term. Understanding what this funding option can offer investors and why this is such a viable option for so many, can help investors determine if this is the best option for them.

For many people, the decision to turn to a hard money lender is an easy one, particularly if you are doing a rehab flip, renovating a home, buying a new property, doing extensive repairs or selling the property to another investor.

In these situations, where cash is needed to fund a purchase or rehab work over a shorter period of time, a hard money lender is the best option. Typically, this is ideal for a project where there are weeks to a month or so to get the work done.

With a hard money loan, you would have a guarantee to fund different rehabilitation and repair projects. When the home is sold, after the closing, the hard money loan is paid off with the sale of the house. The remainder of the proceeds after selling would be kept as profit.

Related: BP 009: Using Hard Money Lenders to Grow Your Business with Ann Bellamy

If this is the type of lending that you are interested in, then there are a few tips that you may want to be mindful of when it comes to getting hard money loans.

If you are convinced that a hard money loan is the best option for you, then you will want to start by making sure that your potential project or the property you are working on has outstanding future profits. You will need to be able to show the potential profits of that investment.

Prepare your repayment or exit strategy for the private lenders. This way they will be more likely to lend you money either through reselling or refinancing by the end of the loan. You may also want to present a strong repayment plan if necessary.

Get all of your necessary documents ready before you apply for the loan with a good hard money lender. This loan is based on real assets and property, but having other things such as asset and income information and credit record info is important as well and can make the process go smoothly.

Consider raising the lender’s trust in your effort to have a better chance of the loan getting approved. Consider putting forward hand cash or cross collateral to add value to the deal.

If you keep these things in mind, you may just find that working attaining a hard money loan is easier than you ever thought possible.

***For Access To The Worlds Largest Hard Money Loan Directory Be Sure To Check Out
The BiggerPockets Hard Money Directory***

About Author

Stan Bril

Stan Bril is the CEO of MCG (www.mcgloan.com), a private lending firm providing business and real estate funding to entrepreneurs and small businesses.

1 Comment

  1. Hard money lenders can also be private individuals. In fact, many of the hard money lenders in the Denver area are individuals. I’ve seen many IRA holders also act as hard money lenders with their tax-advantaged funds.

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