It isn’t uncommon to learn mortgage industry insiders refer to hard money lenders as a final option. While this may be true to the extent that numerous borrowers who solicit loans from hard money lenders do so as a final option, there are many cases in which a hard money lender may be sought before a traditional banking institution. Let’s check out some scenarios where Accredit Money Lender may well be a first stop rather than a last resort.
Commercial Real Estate Development – Let’s say a real estate developer has sunk $10 million right into a development deal and originally planned to promote units in January and would then begin to recoup their investments dollars from the project. As is the situation with a lot of such endeavors, delays may push back the beginning sales date or even the project could go over budget, leaving the developer using a cash negative situation. The developer now have to take out a bridge loan to acquire through his cash poor period so that you can “survive” until the project actually starts to realize a cash positive position. With a traditional loan, the lender would not push through the loan for the borrower for 4 to 6 weeks. The developer would default on his original loan or would not have cash on hand to complete in the project. The developer needs cash today and oftentimes needs the cash for just a two to four month period. In this scenario, a difficult money lender will be the perfect partner because they can provide financing quickly and efficiently.
Rehab Investor – Another example of a difficult money scenario is actually a rehab investor who needs a loan to renovate run down homes which are non-owner occupied. Most banks would run out of this loan since they would be unable to verify that this rehabber will probably be in a position to promptly sell the units for any profit — particularly with no current tenants to offer rent to handle mortgage. The difficult money lender would, in all probability, function as the only lender willing to take on such a project.
Flipping Properties – Another group who could use hard money lenders as a place to start instead of a final option are real estate property investors seeking to “flip properties.” If the investor locates a house they deem as a great value, they might need quick and secure financing to consider buy, renovate and sell the house quickly. Anyone looking to flip real estate does not want to hold onto the property for long periods and also the temporary loan from Accredit Licensed Money Lender will accommodate this need. The pdkfqq can be structured as interest only, keeping the expenses low. Once the property is sold by the individual who is flipping the home, the primary pays back as well as the profit is kept or reinvested into the next project.
A Borrower In Foreclosure –
One final scenario of hard money involves somebody who finds themselves in foreclosure. Once a homeowner falls behind on the house payments, most lenders is not going to give them that loan or restructure their current loan. Occasionally, a person who is facing foreclosure will obtain a hard money loan to prevent foreclosure proceedings and utilize enough time to promote the house.
The question remains why would hard money lenders loan money in case a traditional bank wouldn’t even consider this kind of g.amble. The answer is two fold. The first is very difficult money lenders charge higher rates than traditional lending institutions. The next is the fact hard money lenders need the borrower to possess at least 25-30% equity in real estate as collateral. This insures that in case the borrower defaults on the loan that this lender can still recoup their initial investment.
A difficult money loan is essentially a marriage from a borrower in a tough spot (either from the time sensitive perspective or due to their poor financials) and Accredit Licensed Money Lender that is risk adverse and is willing to take a risk to get a higher return. While hard money loans can be a final option for a lot of, there are many scenarios when hard funds are the only way to go.