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Berkeley-California Hard Money Loans
While investing in real estate is one of the most effective ways to build wealth, it can be difficult to pursue for those who have had past problems with bankruptcies and bad credit. While banks typically decline to provide financing to these individuals, hard money loan lenders do the opposite. Rather than being concerned about an investor’s ability to repay a loan, they focus on the value of the property the investor wishes to purchase, since this will be collateral for the loan. Offering a unique way to obtain financing for investment projects, hard money loans are worth looking into for many reasons.
Whether an investor wants financing to purchase a property they will fix and flip, start a business, or perhaps begin a construction project, hard money loans can be used for these and many other purposes. Since an investor will bypass a traditional bank and instead seek out hard money loans from individuals or private institutions, these loans offer much greater flexibility, since the lender will be able to assess the investor’s ideas on a case-by-case basis.
Rather than wait weeks or even months to secure financing for an investment, real estate investors can often obtain hard money loans in no more than one week. This ability to get quick cash, along with an application process that is far less complicated than mortgage applications, make these loans very attractive to investors eager to move quickly on purchasing property. However, be aware these loans also come with far shorter payback periods, usually 12 months. Therefore, before saying yes to a hard money loan, make sure you are certain you can sell the property or have the money needed to pay back the loan when it comes due.
With most hard money loans, investors will not make equal monthly payments toward principal and interest. Instead, they will likely make interest-only payments each month, with what might be a rather large balloon payment at the end. Since these loans carry very high interest rates, the balloon payment will not only include a large amount of interest, but also any remaining principal and fees for origination, underwriting, and other fees that were assessed when the loan was granted.
Very Little Regulation
Because hard money loans are made by private institutions and individuals, there are very few regulations in place pertaining to these loans. Therefore, when deciding to pursue financing in this manner, always be sure you have exhausted all other options before doing so. Since some people view these loans as coming from predatory lenders, always make sure you fully understand the terms of the loan before signing on the dotted line.
Finding a Reputable Lender
When you are looking for a reputable hard money loan lender, always start by asking other real estate investors in your area. After all, there is a good chance many of them have used or are currently using these loans to make purchases, so they should be able to let you know which hard money loan sources are reputable. However, even after getting recommendations from other investors, do your homework by conducting your own research. Along with an online search to see if there are any negative reviews or other information about the lender, contact your local Better Business Bureau to find out if any complaints have been made against the lender. Once you are satisfied with the information you have found, select several lenders, schedule meetings with each, and soon you may have the financing needed to purchase that prime piece of investment property.
By doing some research beforehand and knowing what questions to ask along the way, obtaining hard money loans can be fast, easy, and profitable for both you and the lender.