Hard money loans are an alternative to traditional loans. Instead of basing the amount of money lent to a borrower on their credit score, hard money loans are based on the borrower's property. Even though this alternative style of loan is helpful and beneficial to lending and borrowing parties, it can still cause difficulties. Learn how to make hard money work for investors by continuing on with this blog post.
As an investor, one of the areas to focus on is the closing speed of a hard money loan. Hard money loans move faster than traditional bank loans. The quicker a closing speed, the more properties an investor can buy or invest in. To keep the process moving and to continue working at a profit, investors must move quickly. This is beneficial to borrowers as well because they can get the money they need quickly and efficiently.
Another area of hard money loans for investors to focus on is the math. Like any loan, it's important to get the numbers right. For investors, your goal is to get a 20 to 25 percent return. Hard money loans won't turn out as much of a profit as an investment, but they will help you build a client base and receive some earnings.
In order for a hard money loan to go as smoothly as possible, it's ideal that both parties put on a positive presentation. Borrowers and lenders alike should meet with one another with the proper paperwork. Investors should give a loan application to their clients, while borrowers should have their taxpayer identification number and initial scope of work for the rehabilitation. Additionally, a buyer should have sales comparisons for the target property, as well as a statement of profit expectations so the lender knows that the borrower can pay the loan back.