How Hard Money Loans Can Help Your Real Estate Investment Goals
Investing in commercial real estate can be quite a lucrative venture. However, it does require some know-how, including understanding the best financing options when you want to purchase a new property. Many investors are turning to hard money loans to finance their purchases. Read on to find out if it’s the right choice for you.
How the Loan Works
For a hard money loan to work in your favor, you’ll already need to own commercial property. This is because the loan, which is available through a direct lender, relies on the property as collateral to prove your intent to repay. Because these lenders aren’t subject to the same government regulations at traditional lenders, they are more interested in your collateral than your business credit. This is usually a good thing for borrowers since it means loans are often approved more quickly.
Commercial Property Is Often Valuable Credit
Investors who are just starting out quickly find out the true value of the commercial real estate they already own. Hard money loans are often one of the only ways new investors find to begin building their portfolio since most won’t mean the funding requirements of traditional lenders. As you build your portfolio and acquire more property, you’ll find your collateral becomes even more valuable. You might even decide to skip traditional funding even after you do meet regulations.
Hard Money Loans for Experienced Investors
Even as an experienced investor, you may find that hard money loans are a better option. Many established business owners use them as bridge loans. This allows you to use your current commercial properties as collateral that gets you the funding you need to purchase more properties, thereby growing your business even further and becoming an even more experienced investor. Once your business growth is established enough for you to apply for a traditional loan, you might consider bank financing as a method of repaying the hard money loan.
Regardless of how many properties you own and how experienced you are in investing, always research potential lenders thoroughly. Reading the fine print, verifying licenses, and checking references or reviews helps to ensure that you choose a reputable lender. Remember, if a deal sounds too good to be true, it probably is, so only sign on the dotted line if you are sure you can fulfill the commitment to repay the loan. After all, you wouldn’t want to lose your current commercial real estate due to a bad business deal.