4 Situations Where Hard Money Loans Are Ideal
If you’re a real estate investor you need to know about hard money loans because they can help you invest! As a service to investors, here are 4 situations where hard money loans are ideal.
Real estate investors know: it can sometimes take money to make money! In other words, if you want to acquire a property, fix it up, and generate a return, you sometimes need some extra money to help you acquire the property or make repairs. But what if you don’t have money or don’t want to spend your own money? That’s where hard money loans come in – they’re loans for real estate investors to help them invest. Here are 4 situations where hard money loans are ideal…
4 Situations Where Hard Money Loans Are Ideal
#1. Acquisition
The first step of any investment is to acquire the property! However, this can tie up your capital in the property for a long time before you’re able to generate any returns from cash flow or the resale. Why tie up all your money in a deal when you can instead just borrow a hard money loan and acquire the property you need. Hint: this is a great way to scale if you need the capital to buy larger properties or more than one property at a time!
#2. Flips/Rehabs
If you buy houses and fix them up to sell at a higher price, you might describe yourself as a “flipper” or a “rehabber”. As you know, this kind of investing ties up a lot of money – first there’s the money needed to acquire the property and then you have to spend even more to repair the property! Investors discover that they tie up a lot of money before seeing a cent of profit in a sale! A hard money loan can help cover some of your renovation costs so you can fix and sell even faster.
#3. Turnkey Wholesaling
Turnkey wholesalers are a special breed of investors: they acquire a property, fix it, rent it, get a management team in place, and then sell the property. That can be a capital-heavy business, depending on the cost to acquire and the cost to repair. Hard money loans give you the capital to acquire and repair properties so you can start making money on them.
#4. Post-Tenant Repairs
Cash flow investors know that tenants don’t always leave at a convenient time, nor do they always leave the property in pristine condition. If your tenants trashed your property before leaving then you may want a hard money loan to cover repairs so you can make quick repairs and get it rented again fast (instead of trying to finance the repairs yourself).
Summary
If you want to invest, you’ll probably discover that you need more money than you want to pay out yourself. Fortunately, hard money loans can help. Hard money loans are tools used by many investors to help cover different situations they face. If you’re an investor, these are 4 situations where hard money loans are ideal – so make sure you take advantage of hard money loans when they’re available.
4 Reasons Why You Should Consider Using A Hard Money Lender (For Borrowers In Pittsburgh, Pa)
Are you an investor in the Pittsburgh PA area, or an investor looking at properties located in Allegheny County area zip codes? Then this is for you: here are 4 reasons why you should consider using a hard money lender.
Real estate investors know that investing can tie up your capital. For most investors, that can create challenges when your capital is all tied up: How do you operate your business? How do you deal with unexpected expenses? How do you grow?
You may have some different options to fund the acquisition or repairs but many investors are turning to hard money loans to help them. Here are 4 reasons why you should consider using a hard money lender…
4 Reasons Why You Should Consider Using A Hard Money Lender
Reason #1. Save Your Own Capital
The top reason, which we’ve already hinted at, is that using your own money ties up your capital and prevents you from running and growing your business. A hard money loan uses someone else’s money, which keeps your capital liquid so you can spend it to grow. Some investors with newly freed-up capital realize that they can actually do more deals now!
Reason #2. Leverage
As an investor, you’re probably familiar with the principle of leverage: getting a loan (such as a mortgage, or, in this case, a hard money loan) to pay for a large project, yet only needing to make small payments over time to pay the loan back. This makes it easier to take on large, costly projects without having to first save up the money.
Reason #3. Professional
Another way investors often fund their deals is through private lenders and investors who they know. However, if you do that long enough, you’ll learn that these private investors may require some extra hand-holding, or they might call you up in a panic in the middle of the night to get their money back because they need it quickly.
Bottom line, they’re nice people but they’re not professional investors. Hard money lenders are professionals who put their money to work and expect a return – they require paperwork and due diligence but they won’t be like those friends-and-family investors who fret night and day about their money.
Reason #4. Speed
Some investors just try to do it alone, using their own capital. When a repair comes up, they save up their money and when they have money they make the repair. But this can take a long time. It doesn’t make sense to delay generating a return on your deal; instead, borrow the money, make your repairs and generate a return on your deal sooner.
Summary
Running your real estate investing business requires capital – capital to run the business, acquire properties, make repairs and so on. Most people need extra capital and are reluctant to tie up all their money in a deal, which is where hard money lenders come in. If you’re trying to figure out whether you should borrow money for your next deal, you’ve just read 4 reasons why you should consider using a hard money lender.
Residential vs Commercial Hard Money Loans
Are you wondering what the difference is between Residential vs commercial hard money loans? Look no further because we’ll help you out in this informative blog post that should answer all of your questions. (And if you have any more questions, feel free to reach out to our friendly and helpful team at (412) 529-1783!
Real estate investors acquire properties, they fix them up and either sell them or rent them out to tenants. This sounds like a great strategy to make money (it is!) but the problem is: it can be VERY capital-intensive, which means it can take a lot of money to run and real estate investing business – and that ties up your money for a while (and what if you need that money?)
Worse yet, investors discover that they can only grow so far using their own capital. Even if you don’t mind your money being tied up, you can only do so many deals at once. If you want to grow, you need even more money.
That’s why many investors are turning to hard money loans as a source of capital to help them. A hard money loan is a special loan for investors to help them acquire properties and renovate them.
Perhaps you’ve been researching hard money loans and are wondering what the difference is between residential vs commercial hard money loans, and which one is right for you.
The answer is that it depends on a lot of situations, but here are some general rules of thumb to help you…
It partially depends on the end-use of the property. Is the property going to be a place for people to live? Or will they be working there? In general, if someone is going to be working on the property, it’s very likely a commercial loan. If someone is going to be living there, then it could be a residential or commercial loan…
If people are living on the property, then it comes down to the size of the structure. A single-family home, or perhaps a duplex or triplex, might only need a small amount of repairs so a smaller loan is necessary. This will end up being a residential loan. However, if it’s a large multi-family unit, such as a condo or apartment building, then it will probably be a commercial hard money loan.
Other factors that could determine whether it’s residential vs commercial hard money loan include: whether it’s a new development or a smaller renovation of an existing property; whether it’s a structure or a set of structures (such as a mobile home park), and what the end-use will be (such as if you’re renovating a house to be a retirement home for several non-related renters).
Summary
Which do you need? Residential vs commercial hard money loans? It depends on a lot of factors so be sure to reach out to us and tell us about your project and we can tell you what kind of loan will help you the most.
3 Potential Disadvantages Of Using A Hard Money Lender in PA
Should you get hard money loans for your real estate investing? In this blog post, we’ll answer that question for you by sharing 3 potential disadvantages of using a hard money lender in PA to help you decide whether hard money loans are right for you.
Real estate investors prefer not to tie up their own capital in a real estate deal but instead, they’ll use other money sources to help them do deals. There are many money sources, and hard money lenders are one such source.
There are good hard money lenders out there and hard money loans are a common way to invest. However, every investor needs to decide for themselves if a hard money loan is right for them. To provide you with a balanced view, consider these 3 potential disadvantages of using a hard money lender in PA.
3 Potential Disadvantages Of Using A Hard Money Lender in PA
Disadvantage #1. Pay Back With Interest
A hard money loan is just that – a loan. And loans come with interest, which is the lender’s way of making money for the service they provide. There’s nothing wrong with them charging interest for the loan but you need to be aware that the interest exists and you need to factor it into your accounting. Are you prepared to make principal plus interest payments?
Disadvantage #2. Need More Money
Another disadvantage of hard money loans is that it’s not a bottomless pit of money. You need to figure out ahead of time how much money you need and then you need to borrow that amount of money. Problem is, what if you counted wrong and need more? Either you go back and apply for more or you look somewhere for the extra money.
Disadvantage #3. Return On Investment
When you borrow money and have to pay it back with interest, this could potentially delay or reduce your return on investment. For example, if you borrow money to fix up a rental property and then rent it out at $500 a month, any hard money loan repayment of $500 a month will prevent you from seeing any return until the loan is paid off. (These are just example numbers and of course, you should structure every loan in a way that makes sense for you.)
Summary
Hard money loans are one of the many investment tools. They have many advantages to help real estate investors run and grow their business by doing more deals. And just so you know – we actually like hard money loans and believe in them. However, it’s important for every investor to know all the facts up-front, and this information about 3 potential disadvantages of using a hard money lender in PA will help you figure out if they’re right for you.