In a single word, yes. Hard money loans are the best decision for any new investor looking to invest in residential rehab. Hard money loans are the right option for people who have a potential investment coming up and require short-term loans to execute. Some of the hard money loans include:
Fix and flip, buy and hold, residential rehab, and distressed property sales.
Even so, certain determinants can guide you to know if hard money loans are best for you. Let’s look at some of these factors.
Do You Have a Spoiled, Non-existent Credit History?
If this is the case, then a hard money loan may probably be the right decision. They are beneficial for a new investor because you are given the loan based on your credit history rather than the value of the investment you are about to make. If your credit history is already damaged, you will experience fewer problems seeking your loan from a hard money lender than a conventional loaner such as a bank.
Are You Searching for a Mortgage and Using it for a Primary Residence on a Long-term Basis?
If you are looking to have hard money and purchase a mortgage for long-term use, then it may not be the best decision. You may be expected to cough up any overage fees out of your own pocket of up to 5,000, according to Moneycrashers.com. Hard money loans are only suitable for short-term investments, residential rehabs, or construction loans. However, if you want a long-term mortgage for primary residences, it is best to seek help from a conventional lender and get long-term interest rates that are lower than hard money loan interests.
Do You Have a Sensitive Development Time?
If the development time is minimal, then you have a very short timeline to secure a loan. So, hard money loans are best for you. The majority of investments in real estate are sensitive to time. Markets can shift quickly and so, you have to work quickly before an opportunity passes. The quicker the approval of the loan the better and construction begins rather than waiting for conventional lenders to check your credit history to determine if you are eligible for a loan.
Hard money has its advantages since it offers people a quicker way of getting cash without the stress of worrying about their credit history. Acquiring a hard money loan can be easy, but it depends on the purpose. Sometimes you may get the loan but for the wrong reasons, considering its high-interest rates, it is a mistake you wouldn’t want to make.