9 Tips on Investing with Hard Money Loans

9 Tips on Investing with Hard Money Loans

  1. Use hard money loans to quickly raise cash and finance other deals

When a great deal presents itself, there often isn’t much time to raise capital for a down payment or other necessary expenses. If the investor owns other properties with equity, they can easily and quickly pull equity out with a hard money cash out loan and put those funds to work in the new deal. The process should take less than 10 days and is much easier than convincing a partner, friend or relative to invest with you, and you won’t have to give up a portion of the profits from the new investment.

  1. Hard money is still available for those with recent short sales, foreclosures, loan modifications, bankruptcies or credit issues

Borrowers with recent short sales, foreclosures, loan modifications, bankruptcies or poor credit will not be able to receive conventional financing from a bank. Hard money lenders are less concerned with these types of issues as they primarily lend based on the amount of equity the borrower has in the property and the value of the property. An unfortunate event doesn’t have to keep you on the real estate investing sidelines.

  1. Get a local real estate expert to analyze your property and project

Hard money lenders know their local market very well. When they are considering a potential loan, they are going to analyze the subject property and the overall project to make sure that it is reasonable. The hard money lender has a vested interest in the project succeeding so they are going to analyze it from every angle. If the lender comes across any issues they will bring this to the investor’s attention, suggest an alternative or advise against proceeding with the project in general. The lender may uncover an issue that could save the investor a lot of agony and money.

  1. Obtain financing when the amount of allowed conventional loans is maxed outHard-Money-Loan

Many banks will only allow an investor to have up to four properties with conventional loans. Hard money lenders do not have these types of limitations. As long as the investor has a sufficient down payment or equity, the hard money lender will be happy to keep lending to the investor. An investor with multiple properties who works with a hard money lender also has the opportunity to cross-collateralize their properties and pull out equity when needed.


Jeff Hensel is a hard money lender at North Coast Financial.

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