The key reason for considering a hard money loan is to purchase an asset with it that will help increase your wealth. As a result, real estate investors leveraging their real estate holdings or cash to make additional profitable investments are the most prevalent users of hard money loans.
The reasons for choosing a private lender over an institutional lender vary. However, the most common reason real estate investors prefer hard money lenders is the convenience with which they can obtain a loan and have funds disbursed.
Here are a few potential instances in which a hard money loan could benefit you.
Acquisition of a Distressed Property
Often, real estate investors look for properties that might not be financed conventionally and can be purchased at a discounted price
To purchase them, they will require cash or a private Lender with cash on hand. In these situations, it is customary for the investor to seize a good chance as soon as possible.
A hard money loan works in the same way as cash. It allows you to buy a property at a lower price and creates value for you while you can repay the loan later.
Foreclosure is when a bank demands the sale of a property to repay a loan. The sole goal of a foreclosure is to get the loan amount that the borrower is unable to pay back.
If the property sells for more than the amount owing at the foreclosure auction, the remaining funds go to the debtor. At a foreclosure auction, the starting bid cannot exceed the amount owed to the bank, allowing an investor to purchase a property at a reduced price.
The person purchasing the property must have the cash to participate in this process. Hard money loans help you purchase foreclosed homes. If you can buy a house for $100K less than what it’s worth and it only costs you $15K to borrow the money, it’s a steal deal for you.
A fix and flip is a real estate investment technique in which a real estate investor buys a property at a discount, renovates it, and sells it to make a profit.
The goal of any flip transaction is to get a good deal on the property. It’s also crucial to be aware of the property’s defects and to be able to fix them. A real estate investor can add value and profit by fixing general property distress, fire damage, leaky roofs, and other necessary updates. Traditional lending cannot work to finance such properties.
A hard money lender will provide you the funds to buy the property, make necessary renovations, and sell it for a good price, making a decent profit.
If you’re looking for reliable commercial private money lenders, Commercial Private Equity can help you out. We’re leading hard money lenders in Atlanta and specialize in bridge, raw land, development, construction, bridge, and other specialized loans for commercial properties.
Contact us for more information about our financing options.