Hard money real estate loans are a great way for investors to secure funding for a project or rental property, especially if their credit score isn’t high enough by conventional loan standards.
Unlike traditional loans, you can close hard money loans fast. Here’s how.
Raise a Sizeable Down Payment
Most hard money lenders swear by the loan-to-value ratio, and they won’t be willing to go over the 60 or 70% mark unless you have around 30% of the money down.
To cut short the back and forth and get straight to approval, you must start saving money before searching for investment opportunities. That way, by the time you do find a property, you’ll have enough in down payment to secure a quick private money loan.
Prove the Property’s Worth
Hard money lenders focus more on problems with the property rather than the investor’s financial straits. So, you have to show them that yours is an investment worth its weight in dollar bills.
Even though secured loans come with one or more collaterals, lenders like hearing why real estate investors think a property deserves time, effort, and money. To make sure the process goes swimmingly:
- Show them different construction budgets.
- Provide them blueprints of the completed product.
- Explain how you came to value the property.
- Give an account of the neighborhood, such as crime rates and nearby schools, malls, and whatnot.
- The property’s future value as per current trajectory.
Come Up with a Quick Exit Plan
Most hard money loans are short-term, meaning you’re expected to pay them off within a year or two of borrowing the money. If you fail to do so, you’re in danger of losing your collateral.
Fortunately, you can avoid the worst-case scenario by carving out an exit strategy that accounts for unexpected pitfalls and provides alternative forms of making the payment no matter your situation.
Thus, you need to establish an exit plan before you apply for a loan and show it to the lending company to get them onboard your investment plans sooner rather than later.
Find Yourself a CredibleReal Estate Hard Money Lenders
The trick to making rapid real estate investments lies in taking your time in finding a reputable hard money lender the first time to avoid wasting your time the second, third, fourth, or fortieth time.
A trustworthy lending company must have:
- A website to match their profession.
- Positive to glowing reviews from previous investors.
- No settled or ongoing lawsuits against them.
- A portfolio of just-funded projects.
- Interest in visiting the collateral in person.
If a lending company has all or most of the above traits, they’re more likely to give you their undivided attention and time, which is precisely why you should put your trust in Insula Capital Group.
Get in touch with one of our private money lenders to get started.