Investing in real estate properties is a great way to diversify your portfolio and ensure financial security in the future. However, it is not likely that you have thousands of dollars just lying around in your locker or bank account that you can start buying property with.
When thinking about buying a property, most people start considering financing options such as property loans. However, even then, you need to prove that you’re eligible for the loan. If you fail to meet the required criteria, you may struggle to secure a loan for yourself.
In such a scenario, one option that you can consider is hard money loans for real estate. Read on to learn more about it.
Hard Money Loans for Real Estate
Whether you’re planning on investing in a property with the intention of flipping homes, diversifying your portfolio, or looking for a permanent residency, it can prove to be a great decision in the long term. However, buying a property isn’t always easy.
If you’re struggling to get a traditional mortgage to invest in a property, a hard money loan can prove to be a successful Plan B. This type of loan is primarily used during real estate transactions. In most cases, it is sort of a short-term bridge loan or a “last resort” when the investor isn’t able to find any other way to secure the money needed for investment.
Banks don’t handle hard money loans. Instead, you will have to look for an individual or a company that provides these. These are usually taken out for a short period of time and are a way to raise quick money. However, the downside is that the LTV ratio is lower with hard money loans, and they come at a higher interest rate.
That being said, since there isn’t an official rate or law regulating hard money loans, the terms can often be negotiated between the borrower and the lender. Additionally, the time frame for funding is much shorter, since they rely on collateral instead of the financial status and credit scores of the borrower. However, you will need a property in your name or any other tangible commodity that can be used as collateral.
Finding The Right Hard Money Loan Lenders
As you may already understand, hard money loans can be a little complicated. Since you borrow the money from an individual and not an official bank, it is crucial to pick the right lender. Almost anyone can become a hard money lender. However, not everyone will offer you the best rates. Picking the wrong lender isn’t just an expensive mistake, but can also get you in trouble in the future.
Here are some steps you can take to ensure that you’re picking the right lender.
- Research as much as possible. With so much information available at our fingertips nowadays, it isn’t as challenging to make an informed choice. So before you choose a hard money lender, make sure to do a thorough background check beforehand. Compile a list of the best money lenders in your location; Google can help with this. Then individually research them to find the most suitable and reliable one.
- You don’t make the decision of investing in real estate overnight. It is a slow process that may take months, if not years. So as soon as you start thinking about it, the first thing you need to do is start networking with real estate professionals. People who have been working in the business will be able to help you learn about the business and guide you whenever you feel confused or stuck. These people include real estate agents, attorneys, mortgage brokers, people who have diverse portfolios, people who flip houses, and any other real estate professional that comes to your mind.
- You can build a strong network if you start attending local Real Estate Investors Club (REIA) meetings. As the name suggests, you will come across all kinds of real estate professionals, as well as prospective buyers in these meetings. In most cases, these meetings are open to the public. Therefore, you don’t need to have a strong portfolio or association with the business to attend these. When you do attend such meetings, don’t just stand in the corner while sipping free mimosas. Instead, make effort to get to know the people around you. Try to find out who the best people in the business are and strike up a conversation with them. If you build a healthy rapport with these people, you’ll find it easier to access capital when you need it. You may even ask them to recommend you the most reliable hard money lenders in the locality.
- The biggest advantage of the internet is that communication is easier than it was even before. And the easiest way to do so is by making use of social media. From professionals to commoners, everyone is on Facebook, Twitter, and LinkedIn nowadays. This is because the reach of social media is unmatched nowadays, and you should take advantage of this. Any reliable hard money lender would have social media accounts that allow everyone to leave honest reviews. Take a good look through these reviews to find the best hard money lenders. However, if all the reviews seem too similar, it could be a sign of spam.
- In most cases, hard money loans are a last resort. In which case, you may not have time to do all of this when you’re already in a time crunch. Therefore, if you’re planning on investing in real estate, make sure to start taking all of these actions before you’re stuck in a situation where you need money. Have a few options of hard money lenders in the back of your head before you start the investment process. This way, if you need money in an emergency, you wouldn’t have to make a rushed decision.
Need to buy a property in Dallas and need a hard money loan? Consider visiting DFW Specialty Lending for a consultation today. We’ll help you understand the ins and outs of the investment and guide you to make a better decision.