If you want to invest your money and need a loan, it’s imperative to figure out what type of service you would need from the lender. Sometimes a hard money lender might be the necessary option to consider, and you can get a pretty good return on investment this way as well. But before we go with such an option, we need to know what is a hard money lender & rehab loan.

That way, you can understand what lender option is ideal for you, and where you will be getting the best possible experience and results. It can also eliminate and alleviate a lot of the potential issues that can arise.

What is a hard money lender?

The hard money lender is a company or approved lender that will provide loans secured by real estate. With a hard money loan calculator, you can identify exactly how much you need to pay form such a loan. Many times, these loans are used in real estate transactions with the idea of securing that loan with the property itself.

These loans usually involve money from a company or individual. That’s why a hard money lender is usually not a bank. The loan relies on collateral, which is helpful for the lender, but it also doesn’t rush the person borrowing the money. The funding time frame is shorter too, so these loans tend to have a very quick timeline. It’s also one of the reasons why they have become so popular over the years. People have become incredibly focused on getting a good loan, and in these situations, having such an excellent loan can help speed things up, while alleviating the process more than expected.

What are hard money rehab loans?

These are hard money loans, but the rehab funds are paid in 1-3 draws. Usually, that allows the lender to ensure the property is verified for repairs. That alone is important, because the lender wants to be 100% sure they will not invest in a property with inherent risks. Obviously, investing in those properties can be incredibly difficult, and that’s why you lenders will always take some precautions, just to be on the safe side.

For lenders, hard money loans can sometimes be risky. So that’s why they opt for a rehab loan, in order to ensure that the property is checked out. And if there is any need of repairs, or if repairs were made, the lender will have a good idea of what the borrower wants and needs, and in the long run it leads to a much better result anyway. It’s all a great thing to focus on, and the ROI as a whole can indeed be good.

How do you qualify for a hard money loan?

Whether you go for regular or commercial hard money lenders, usually you will need to undergo a check from them. The idea is that not every lender will offer you money without knowing whether you qualify and adhere to their requirements. For the most part, you will need to go through a comprehensive credit history check.

Aside from that, there are other requirements, if you get the hard money loan for a business, they want to see the business plan. And yes, they also want to know if this is for a secondary residence or property. Lenders will always have all kinds of different requirements as well, depending on the situation. That’s why you want to work closely with the lender as you understand what they need, the expectations they have and other relevant factors.

What are the benefits of getting a hard money loan?

Usually, private money lenders Florida will provide you with a hard money loan if you have a very serious plan. And there are certain benefits that come from a hard money loan too, depending on the situation. That’s why you need to make sure you have a good plan regarding the way you want to use money, how you want to use that money for the loan and other things like that. But once you share that info, it will be much easier to narrow things down and ensure you have a good idea of the expectations and results in the end.

• A hard money loan is great if you want to purchase a property, renovate and sell it. Of course, every lender still has their own requirements when it comes to something like this. But in general, knowing the overall value you get from the lender and how much you can sell the property once you repair it a bit, that alone makes hard money loans very useful.
• These hard money loans are not based on your personal credit score. Nowadays, all lenders rely on that info and it’s difficult to know whether you are accepted for a loan or not. But with hard money loans, you don’t have to worry about your personal credit score. It’s still possible to get the loan. Here the lender is more focused on knowing if/how you repay them, rather than your credit score.
• Of course, it’s also important to note that these hard money loans are not going to appear on your credit report. These are not included in reports made by the credit bureaus. That means you don’t need to worry about the credit score getting lower or anything around that. It’s great because it does lower the risk that can arise, and you still have a very good option to think about. The more you focus on getting the right value here, the better it will be.
• Also, interest-only payments are available. As a borrower, you can make lower payments during the renovation process, and then you can repay the loan or most of it once you sell the property. It’s definitely a great thing to focus on, and it can alleviate a lot of the potential challenges.

Challenges brought by hard money loans

These hard money loans also have some downsides too, depending on the situation. That’s why you want to make an informed decision before you actually go onward with this type of loan.

• Usually, hard money loans require some experience. If you’re new to flipping homes, for example, this type of loan can prove to be rather challenging, because it will require a lot of information and knowledge. So it’s a lot riskier for a newcomer, since you don’t have all the info and knowledge to prevent any potential downsides that can sometime arise.
• We should also note that the hard money loan doesn’t guarantee any sale price. Since the real estate market is changing, prices do change, and you will end up asking for a loan that’s less than you might need. And there’s no guaranteed profit. That’s why you have to study the market and ensure you minimize risks as much as you can. It’s not as easy as expected, but it’s going to be worth it in the end.
• Interest rates can be quite high for a hard money loan. That’s because banks will not offer this type of service, only companies like credit unions or private lenders. While you can negotiate the rate of your loan, you still need to realize that in many cases, these loans will end up being quite expensive from an interest standpoint.

Is it safe to opt for a hard money loan?

Generally, if you want to buy and then sell a property, these hard money loans are actually a very solid approach. With that in mind, you should keep in mind that every lender has their own requirements. You want to know exactly what the lender requests from you, what ROI you can get and if there are any other requirements they have.

Once you know the exact requirements, it becomes much easier to know exactly how to manage this situation and what issues can sometimes arise. At the end of the day, a hard money loan can bring an exceptional result, especially if you are looking to buy and sell properties. Of course, you still need to understand that profits are not guaranteed. Sure, sometimes you can make a profit, other times less so. But the more you assess the market and perform your due diligence, the better.

Are hard money loans fix and flip loans?

Yes, usually these are fix and flip loans because you get the money to buy a property, and then you repair it. The main focus is to try and get the property cheaply, so you can improve or even upgrade it. And once you finish, you repay the loan and make a profit. As we mentioned earlier, these types of loans can have inherent risks, so they aren’t always going to be ideal for everyone.

Yet if you are a person with real estate experience, you know the market value and trends, you can minimize those risks. However, don’t get into hard money loans thinking they have no risks. There are still certain risks involved, and you have to understand them when you get into this type of thing.

Hard money bridge loans can be a good idea, especially if you want to flip properties quickly. But as always, you want to work with the best hard money lenders for real estate. Most of the time, you want to use a hard money loan calculator to see the interest rate.

A hard money calculator is great because it shows you exactly how much you receive from the loan, you can compare it with the expected sale value, and then see the profit. Of course, you also want to take into account other things like an increase in expenses. Negotiating the interest rate beforehand and inputting that into the hard money calculator will also help ensure you know the value and prevent any problems that could sometimes arise.

What should you expect from working with a hard money lender?

When you work with hard money lenders for real estate, usually the process is designed to be very seamless and straightforward. The idea here is that you will learn about the interest rate, and that’s a crucial part of the process. You want to know what the lender expects you to pay back, and usually interest rates can be negotiated. Although obviously, it also depends on the lender.

Aside from that, you also have to agree with the lender regarding the loan term. Most of these hard money loans tend to have a very short term. A shorter term is important for the lender, but also for you, because you want to repay the loan and make a profit. Such a lender expects a shorter term, because they want to make a profit and so do you. Aside from that, approval metrics matter here too. There are debt to income ratios and other things that need to be taken into account. Every lender has their own approval mechanics and requirements.

Lastly, we should also note the regulation and oversight. These lenders are very similar to payday lenders, in the vein of not being extremely regulated. However, there are still certain rules that apply, and you need to know those.

Conclusion

Working with a hard money lender like Mortgage Capital is a very good idea if you want to fund your new home flipping venture. These hard money loans are extremely versatile, adjustable to your needs, and they can help bring in front a great source of income. Of course, it’s imperative to work with a team that you can trust.

Mortgage Capital has a proven track record and thousands of happy clients. On top of that, you have access to great terms, the ability to set your own loan term based on what fits your needs and many other benefits. The company is one of the best commercial hard money lenders in Florida, and you will have exceptional results if you work with them. That’s why it’s a great idea to opt for a hard money loan if necessary, and you will be incredibly happy with the results!