But this is not the WHOLE STORY of real estate investment business, I wondered when one of the successful real estate investors told me and I asked amazingly what is missing in it? He nodded and sat a quiet for a while then told me Hard Money Lending. I asked why we need a hard money lender. As I was wondering why we would want to pay for more expensive money at a more expensive rate, when they could go to bank. The real estate investor told me that we also have some new investors who wonder what is the rate difference among conventional loan which one can get for five, six or seven percent and hard money loan that is going to range between 15 and 18%. They also wonder WHY there is a big difference in interest rates of these two money lending institutions.
The most important reason for which a real estate investor needs to choose hard money lending is that conventional money lending institutions like banks won’t lend on properties that you can make enough money. If you are looking to buy a property, improve that property and sell it for a profit, traditional lenders aren’t going to lend Rehab Loans on properties that you work on is just the bottom line. Reason for that is traditional lenders have paper they want to resell and if they can’t resell that paper to Wall Street then they are not going to write it even if they know that they can hold the paper meaning hold is on books and service and collecting the payments and doing such types of stuff themselves. They don’t want it because if they ever face a CASH CRUNCH, they want to sell that paper to a third party or to Wall Street so they can recapitalize. The concept of recapitalizing means that they are selling their paper so they can get cash back in their pocket so they can go and do new loans.
Why you need a hard money lender because nobody else is going to lend rehab loans for property you can make money on. If you are going to buy properties that you want to rehab and resell for a profit, a hard money lender is going to be very best friend. Now why do you pay extra when it comes to a hard money loan? And the reason is because hard money lenders are going to do things based upon asset. If you are a real estate investor there is greater risk and it is SPECULATIVE INVESTMENT. You are hoping that things work out but you may not do what you are supposed to unlike a homeowner that has a job, he gets qualified and is going to live in the property.
These are some of the reasons why you are going to see some pricing difference between these two. Again when it comes down to why you need a hard money lender it is quite simple because no one else is going to lend to you and if you want to be a successful fix and flip real estate investor, a hard money lender is going to be your best friend. Happy Investing!
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Hard money loans are expected to be the primary source of funding for real estate deals over the next three to five years. With banks tightening their lending policies due to the recession, more and more investors are turning to hard money lenders for financing. This has resulted in stiff competition for hard money loans, making it doubly hard for many investors to secure financing for their real estate deals. Go visit www.rehabhardmoney.com the number one source of hard money.
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