HARD MONEY LOAN
What is “hard money lending”? If you are new to investing passively, you might want to stay away from “hard money loans” since as the name says, it’s “hard”. Hard in the sense of tighter terms and conditions; and especially higher in interests … that is why it’s “hard money”. Hard money is essentially private money that is lent out to borrowers who would otherwise get a conventional loan from banks and other financial institutions. This type of loans may not necessarily be for mortgages and secured by real estate property. Instead, hard money loans are a quicker and may be easier type of loan that is secured by other collaterals and for various purposes, such as construction loans, bridge loans, personal loans, car loans, etc.
The question here is why would an investor want to lend out hard money then? And why would a borrower want to borrow hard money? First of all, hard money is often accessible within 24-48 hrs, depending on the lender, whereas conventional loans from banks require a few business days to weeks just to qualify for the loan. Therefore, borrowers who need funds right away will need to look elsewhere for immediate money. On top of that, in many cases, banks only lend out the funds when the borrower qualifies. In the case of hard money lenders, it is often the collateral that needs qualifying. If the borrower is in desperate need of cash, say to snatch up a lucrative deal, they will be more than willing to pay higher interests on that loan. That is where the investor comes into the picture with the money, setting the terms and conditions, while collecting the higher interest. How much interest can you charge? That depends on you and whether the borrower accepts or not. Of course, as the hard money lender, you will definitely want to make sure there is enough collateral to cover all costs in case the borrower defaults. So, there you have it, a win-win situation! Like with all investments, you must do your due diligence first before getting into any deals, no matter how profitable it may be!
If you are interested in learning more about this type of real estate investing, feel free to contact us and we can provide a one-on-one consultation with you to go through the process of investing in hard money lending and together, let’s start making money like the bank!