If you need some help understanding hard money loans read this article.
Does hard money lending confuse you? Does it seem to complicated? Read the article below for an unconventional view on hard money loans. It will hopefully explain the process in easy to understand terms.
One reason why people fear venturing into real estate investing is because they think that this business requires a lot of capital. True! However, the money doesn’t have to come from your own pocket. Those who want to try real estate investing can do so even with little or no personal money at all. What you need to do is to convince hard money lenders to finance the project for you.
Borrowing from hard money lenders is like building a football team. The intention of your team is to win as many games as possible to take home the championship. Let’s say you found the perfect set of players, a killer quarterback, and a coach. However, you can’t launch this team as you don’t have the money to fund their ridiculously large salaries.
What do you do? You search for a sponsor who will fund your team. Maybe there are some things you don’t like about your sponsors but you really need it to operate. if you have to endure hearing the company’s name again and again and wearing it on your uniform, you will.
Relating this to real estate investing, the sponsor is your hard money lender. The team is your project and the championship is your profit. Makes sense? There are things about hard money you wouldn’t like: the high interest and the strict terms of payment. Despite this, investors still like using this form of financing for many reasons.
Before you think ill of hard money lenders, let’s clarify one thing: they will not fund your project if they think you will not profit from that venture. In the same way, a sponsor will not fund your football team if that company thinks that you will end up last in the table. So bear in mind that if your loan is approved by hard money lenders, that means it is profitable.
They will examine the potential of the property and not your credit score. This is very helpful, especially to investors who do not have a good credit score. In football, the sponsor will look at your team and what it will be able to do with a little push. Because as it is, your team is just a group of good players; they have yet to win a game. If you convince a company that your team is a champion in the making, that firm will sponsor you. If you convince hard money lenders that the property you want to flip will result in profits, then you will get that financing you need.