Being a real estate investor is not an easy career path, especially when traditional financing institutions, like banks and credit unions, will not approve you for a loan. Therefore, when you find that perfect investment property, it can leave you searching for alternatives, such as trust loans to beneficiaries. However, have you ever considered using a hard money lender Los Angeles? There are at least ten excellent reasons many real estate investors use hard money loans.
1. Application and Funding
Unlike traditional lenders, private mortgage lenders have a quick application, approval and funding process. Most investors will receive conditional approval within five minutes. Also, once approved, an investor will usually have the funds within a week or two.
2. Lender Flexibility
Conventional loan programs typically have approval structures in place that are arbitrary and rigid, making it difficult to be approved. Hard money lenders do not have the same criteria, and what they do have is far more flexible than other institutions.
3. Focus on Property Value, Not Credit
You will also find that to receive approval through a traditional bank you will typically need good or near-perfect credit. The same cannot be said of hard money lenders. These lenders are more focused on property value than credit score.
4. Asset-Based Financing
Since hard money lenders are more interested in property value, as asset-based lenders, they are not as concerned with credit issues, like short-sales, foreclosures, bankruptcies or loan modifications. Fundamentally, for hard money loans, the property being purchased is collateral for the loan.
5. Potentially No Loan Cap
Most traditional lenders limit the number of loans to a single borrower. For example, many banks will not allow one individual to have more than four loans out at a given time. Hard money lenders, however, do not have such a cap because they see an investor with a large portfolio as a good thing.
6. Cash-Out Refinance Loans
Hard money lenders also allow an investor to reinvest equity into other real estate purchases. Typically reserved for investors with a significant amount of equity in a property, cash-out refinance loans can allow you to make a fast property deal when necessary.
7. Cash On Hand
With hard money lenders, a real estate investor does not need to be cash strapped. If you only depend on money in hand to make deals, then you are possibly limiting your potential business and the number of properties you can take on at a time.
8. Quicker Close, Lower Purchase Price
With faster approval and funding, you can promise sellers a quick close. Many sellers are willing to accept lower offers that reduce time in escrow.
9. Stronger Offers
Hard money loans can be as good as cash in certain situations. While banks tend to pull loan approval at the last minute, hard money lenders rarely, if ever, do this, meaning that you’re providing a stronger offer than traditional lenders.
10. Experience in Real Estate
Conventional lenders are not as experienced in real estate as hard money lenders, and they are not typically comfortable with property investors. Therefore, go with a lender who understands your business and is invested in your success.
Are you concerned about bank approval on your next property? Why not go a different route and apply for a hard money loan.