Comedian Ellen DeGeneres moonlights as a house flipper
Over 15 years, DeGeneres has been able to create a real estate empire. Lucky for her, buying real estate properties to flip is easy when you’re a millionaire celebrity.
For us non-millionaire celebrities, who want to make a name for ourselves, we need loans to make our business ventures possible. Whether you’re a real estate investor, or you’re a budding entrepreneur, the right loan can help make you millions.
Read on to learn everything you need to know about getting a hard money loan.
What Is a Hard Money Loan?
Standard loans require that you provide proof you’ll be able to repay them. A hard money lender, on the other hand, offers a different approach.
Here are some of the factors of using hard money lenders:
- Fast process
- Easy approval terms
- Ability to borrow more
- Flexibility for repayment options
- Multiple choices for collateral
Rather than worrying about your ability to repay, they will focus on making sure you have the collateral to secure the loan.
- Collateral Choices
If you’re using the loan to purchase a piece of property, the property itself can serve as your collateral. However, the exact terms of your hard money loan will depend on what lender you go with.
Certain lenders will give you multiple options for collateral. For example, you might be able to secure the hard money loan using one of your assets.
When it comes to exploring your assets, you should take a moment to review what ones you can afford to use as collateral.
Do you own another piece of property? Do you have a retirement account? Both retirement accounts, and other properties, are acceptable forms of collateral for lenders.
- Super Speedy
You’ll be able to close more quickly with a hard money loan than a traditional loan, where you have to go through a lengthy approval process. If you’re pressed for time, a hard money lender could be your best option.
Here are some of the super-fast benefits:
- Quick approval process
- Low approval standards
- Once you establish trust, the loan process is even faster
Since the lender will only care about the collateral and not your financial situation, the approval standards are also lower.
Once the lender trusts that you have the right type of collateral, you’ll be able to quickly get the funds you need.
- Build Relationships
When it comes to loans, it pays to be reliable. Since hard money loans allow you to work with an individual, instead of a large corporation, you can establish a strong relationship.
Once you show the lender that they can count on you to repay your loan on time, they’ll be more likely to give you even better deals down the road. We suggest paying your loan off early whenever possible.
When the lender sees that you’re serious about keeping your word, they’ll be willing to lend you higher and higher amounts. They might even be willing to reduce or eliminate the origination fee for your hard money loan.
- Flexible Loan Terms
A hard money lender will do more than just provide you with quick cash. They also provide you with a more flexible loan agreement.
Traditional loans use a standardized underwriting process that imposes strict rules. A lender who is willing to give you a hard money loan, on the other hand, will be willing to evaluate your specific situation as an individual.
Depending on the type of collateral you’re putting down, you may be able to adjust things, such as how your repayment schedule is set up.
- Easy Approval Terms
Remember, the main thing hard money lenders are looking for is collateral. So, if you’re buying an investment property, the lender will want to know how much the property is worth.
If you should need to borrow against a separate property you own, the lender will want to know how much that property is worth. If your credit report doesn’t look great, it won’t interfere with hard money lenders’ decision to give you a loan. in some cases, lenders for hard money loans might not even look at your credit.
- Perfect for Certain Situations
Although they are highly convenient, hard money lenders, aren’t the best choice for every deal. Instead, you’ll need to pick what situations you use these loans for.
Here are the perfect situations to go to a hard money lender:
- You’re looking to buy land
- You fix and flip houses
- You’re performing a construction project
- If you have credit problems
- Real estate investors with time restraints
- When time is of the essence, hard money lenders can save the day.
- Better Than a Mortgage
Standard mortgage lending regulations can make the process of getting a mortgage difficult. You may find that it’ll take months simply for you to be able to close on the loan, and that’s after you’ve already gone through the application process.
If you’re a real estate investor, you could miss out on purchasing a specific investment property. However, with access to hard money lenders, you can get the funds you need in a matter of weeks.
- Borrow More
Perhaps you have decent credit, but you’re having trouble getting approved for the right loan amounts. When you need to borrow more money, hard money lenders can help make that happen.
For instance, a traditional mortgage will require you to put down a minimum percentage of the purchase price. The more money you’re willing to put down, the better terms you can get on your loan.
Luckily, you won’t have to worry about coming up with that type of money when you go to a hard money lender. Instead, you’ll simply need to pay the origination fee, and the monthly interest until you pay off the loan.
Now, you can have more money, when you need it most. You’ll also be able to apply for the exact amount you need, rather than having to budget for a down payment.
- Great for Beginners
If you’re starting as a real estate investor, it can be tricky trying to establish yourself. Once you’re established, it’ll become easier to secure a line of credit with a reputable banking institution.
As you wait to build your reputation, you can use hard money loans to stay in the game. Instead of putting down your own money, you’ll be able to put down the hard money loan funds and build your business.
Make a Profit
Now you know how a hard money loan can help you thrive financially. We hope our article was able to teach you at least 1 new thing about how these loans work.
If you’re looking for more ways to become financially free, we can help! Go ahead and read another one of our articles.