REAL ESTATE

3 Ways Hard Money Can Facilitate Real Estate Investments

Hard money is utilized for a variety of reasons. Corporations rely on it to fund mergers and acquisitions. Businesses looking to expand turn to hard money to get the ball rolling. Even real estate investors lean on hard money to grow their portfolios. In fact, real estate acquisitions could be the number one driver of hard money lending.

Hard money brings a lot to the table for real estate investors. It gives investors opportunities to do things they could not otherwise do if conventional bank funding were the only option. Likewise, hard money lenders are able to put their money to work in ways that are impossible with other types of investments. So it’s a win-win for both parties.

If you are thinking of getting into the real estate game, consider the following three ways hard money can facilitate your acquisitions:

1. Timely Approval and Funding

One of the big pluses hard money offers is fast turnaround. Normally, it takes a bank anywhere from 60 to 90 days to close on a loan. That may be acceptable when you are trying to buy a primary residence, but it doesn’t work when you’re looking to acquire investment property.

Investment deals tend to go off much more quickly. And if there is ever competition between two investors who have similar resources, the one who comes up with funding first tends to win. The big benefit of hard money is that lenders can  usually close and fund loans in a matter of days.

Actium Partners is a Salt Lake City hard money lender that has been known to fund projects within 24 hours. While such fast turnaround times are not the norm, Actium says that hard money lenders have the flexibility to work very quickly if they have to.

2. Funding in Advance of Conventional Financing

Hard money loans are short-term loans by nature. As such, real estate investors do not have access to hard money loans with terms of 10 and 20 years. That could present a problem, especially if an investor doesn’t have the financial resources to pay off a loan within 2 to 3 years.

In such scenarios, hard money is still in play. An investor can arrange a hard money loan to acquire new property, then turn around and use that property as leverage to obtain a conventional loan. The proceeds from the conventional loan are used to pay back the hard money lender, thus giving the investor a lot more time to settle their debt.

3. Funding Pre-Construction Needs

Real estate investors are known to use hard money loans to fund needs prior to construction. For example, an investor may want to buy a piece of land on which he will build apartment units. His bank is more than happy to fund construction but will not fund land acquisition or improvements. Hard money is the solution.

A hard money lender might offer a short-term loan to cover acquisition and improvement costs. Once the land has been acquired and improved, the bank is satisfied that the project can move forward. It then issues the first construction loan, which includes money to repay the hard money lender.

If nothing else, these three examples illustrate just how flexible hard money is. That flexibility, combined with fast funding, makes hard money attractive to real estate investors. Investors need the speed and flexibility that hard money lenders offer. They need the ability to move on a deal as soon as they run across it. Lenders capable of providing funds in a timely manner greatly improve an investor’s chances of getting a deal done.

sudarsan

Sudarsan Chakraborty is a professional writer. He contributes to many high-quality blogs. He loves to write on various topics.


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