Hard money loans have helped many real estate investors get started in real estate and become successful. But how do you find a hard money loan, who lends hard money and what is a hard money loan?
Hard money loans can generally be described as high interest loans available to borrowers with any credit rating, as long as they can can provide solid collateral – usually equity in real estate, such as a home. These loans are almost never issued by banks or deposit institutions, but rather by private money lenders who specialize in short term lending at high interest.
Many real estate investors overlook hard money loans as a strategy for acquiring property. That’s because these loans are typically used by desperate property owners looking for a way out of the real estate market, rather than into it. But hard money can work for anyone, and it can be particularly useful if you’re a new investor looking to build your portfolio quickly.
Normally a home owner in need of a big loan would apply for a second mortgage, using real estate equity as collateral, but bad credit can make things difficult here. If a home owner has missed a few mortgage payments, the banks may refuse to provide more financing – hard money might be the only option in this case.
Investors can take out hard money loans to buy a property, as long as they provide acceptable collateral – in this case it could even be the property they’re buying.
The strategy here is to find a pre-foreclosure property, or any real estate with an owner prepared to sell below below market value as long as the sale is fast. If the investor can re-sell the property at full market value, before too much interest is paid on the hard money loan, he or she can make a significant profit.
So how do you find a hard money lender and how do you choose the right private money lender? This is where the book – Attracting Private Money Lenders by John Pribble can help.
John L. Pribble, Jr. started his real estate career in 1999 at the age of nineteen, and earned his real estate license in 2000. Today he is a successful real estate broker in Fort Worth, TX. John has been successful in dealing with banks, wholesaling, rehabbing, subject-to, owner finance, rentals, short sales, foreclosures, brokerage and client representation and property management.