If you’re a real estate investor, a hard money loan may be a great idea for you. However, these loans aren’t right for everyone. In fact, they aren’t even right for all investors. This guide explains whether hard money loans are a good idea, and in which situations they can work in your favor.
Are Hard Money Loans a Good Idea?
Hard money loans are only a good idea if you need to borrow money for a very short period of time, you’re willing to spend more than average on interest, and you need to borrow on the after repair value of a home. Generally, the people who fit this bill are real estate investors who want to fix up and flip homes.
Hard money loans are a good idea for investors who don’t have enough cash on hand to pay for a house outright, or to pay for all the repairs necessary to flip a house and sell it at a profit. These loans enable borrowers to get the cash they need quickly so they don’t miss out on great deals; they also enable borrowers to get enough money to make repairs and improvements on a property.
Related: FAQ on hard money loans
You’ll still have to come up with a down payment, and you need to know that you’ll need to repay the loan in full rather quickly. You can’t expect to take out a hard money loan for 30 years like you could a conventional mortgage.
Hard Money Loans Are for Real Estate Investments
Generally speaking, a hard money loan is the ideal choice for a house flipper. That’s because you can get funding quickly – usually within a matter of days, as compared to months with traditional lenders. It’s also because these loans allow you to borrow enough money to fix up a property so you can sell it for a profit.
Do You Need a Hard Money Loan?
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