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Real Estate Investment Business and Hard Money Lenders

One of the major struggles for any real estate investor or business in general is to make sure there is enough funding for major projects. This is especially imperative for any real estate investor who wants to grow his or her business. This article will go into a bit of detail explaining what a hard money lender will do and when you may use this type of financing.

A hard money lender is a lender who does not usually lend based upon your assets and credit score. Think about when you get a normal mortgage: you have to prove your income, your assets, and have a good credit score to be approved for a mortgage most times. What a hard money lender looks for will be different. This particular type of lender will ensure that the property you are working to purchase is below market value. There is usually a simple formula that the lender will use: the amount he or she will end will not exceed 65% of the house's after repair value. If you have a house you can buy for $50,000 which needs $10,000 of work and will be worth $100,000 after the house is repaired, a hard money lender will normally go for this deal. This makes sense from their point of view because if you default, they can still take over the deal and walk away with money in their pockets.

You will want to use this type of financing if you have major rehab projects. This is normally where you will have to go because it often can be very difficult to find bank financing. There are often fewer hoops to jump through when dealing with a hard money lender. These types of lenders can be expensive so you do not want to use this source of financing exclusively. The lender will often charge between 3% and 5% of the loan amount as an origination fee along with interest charges being anywhere from 10-16% or higher.

You can receive funding for the rehab work as well as the purchase price of the house so this is of great benefit to you. You may have to put up money to do the rehab work and then the hard money lender will pay you back the money out of escrow once the repairs have been inspected. This form of lending can be expensive but it is a surefire way to get in the game and do deals if you have no other forms of financing available.

About the Author

For more articles and a 10 part e-course on how to create your own Ultimate Buying and Selling Machine! plus over 50 training audios, simply go to www.LarryGoinsFreeOffer.com where you will gain instant access

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