What do you picture when you think about buying property? Do you want a three-bedroom, two-point-five bath house for the family? Or do you dream about becoming the next Donald Trump? Many people aspire to become real estate moguls. Buying damaged or otherwise distressed commercial or residential properties, fixing them up, then selling them at a profit is a sound business model. However, if you’re low on cash, you will need to find the start-up money to fund your enterprise.
Most banks want a sure thing–it’s hard to sell them on your potential profits–particularly if it is a property that looks like a poor investment at first glance. Your best bet is to find a private lender with money to spare. This type of individual is known as a hard money lender. They can be found through brokers or by word of mouth–ordinary people like you or me, who are willing to invest their money on their terms.
Hard money lenders will usually have strict guidelines, and their loans are designed to be short-term bridge loans–usually from six months to three years. Because they greenlight loans that aren’t up to bank standards, their interest rates tend to be higher. But because they are private individuals, rather than a government-backed institution, they make their own rules. This means they can be more flexible if they are interested in the investment you present.
The Benefits of a Hard Money Lender
If you have poor credit, a hard money lender can be easier to deal with than a bank. Because the terms of the loan are so favorable to the lender, they are usually more concerned with the value of the property. If you have big dreams–and little upfront money to work with–a hard money lender that shares your vision can help you bridge the gap to success.