| Many real estate investors overlook hard | | | | hard money might be the only option in this |
| money loans as a strategy for acquiring | | | | case. |
| property. That's because these loans are | | | | |
| typically used by desperate property owners | | | | The limit for hard money loans typically |
| looking for a way out of the real estate | | | | hover at about 60 to 70 per cent of a |
| market, rather than into it. But hard money | | | | property's quick sale value, defined as the |
| can work for anyone, and it can be | | | | price a lender could reasonably expect to |
| particularly useful if you're a new investor | | | | realize if the borrower defaulted on the |
| looking to build your portfolio quickly. | | | | loan, and the property was liquidated fast. |
| | | | The interest rate for a hard money loan is |
| Hard money loans can generally be described | | | | usually in the 15 to 25 per cent range. |
| as high interest loans available to borrowers | | | | |
| with any credit rating, as long as they can | | | | Investors can take out hard money loans to |
| can provide solid collateral - usually | | | | buy a property, as long as they provide |
| equity in real estate, such as a home. These | | | | acceptable collateral - in this case it could |
| loans are almost never issued by banks or | | | | even be the property they're buying. The |
| deposit institutions, but rather by private | | | | strategy here is to find a pre-foreclosure |
| lenders who specialize in short term lending | | | | property, or any real estate with an owner |
| at high interest. | | | | prepared to sell below below market value as |
| | | | long as the sale is fast. If the investor can |
| Normally a home owner in need of a big loan | | | | re-sell the property at full market value, |
| would apply for a second mortgage, using real | | | | before too much interest is paid on the hard |
| estate equity as collateral, but bad credit | | | | money loan, he or she can make a significant |
| can make things difficult here. If a home | | | | profit. Hard money loans have helped many |
| owner has missed a few mortgage payments, the | | | | successful investors get started in real |
| banks may refuse to provide more financing - | | | | estate. |