If you are in the market for a distressed property that you want to fix up, you may be looking at using hard money loans. In most cases, when you get a normal residential loan, the value of your property is going to remain the same while you own it, even if you make some adjustments here and there. When you are buying a distressed property, you are almost always going to improve the condition of it dramatically. That is why you are buying it to begin with. Some people are hesitant to use hard money loans because they seem scary and difficult to obtain. Here we will discuss why this is not the case.
The first thing to acknowledge is that hard money loans can actually be much easier to get than a regular loan. This is true for many reasons; but the hardest thing to do is actually estimate the value of the property after the corrections are made. Generally, a professional appraiser will be in charge of this aspect, so you do not need to worry about it. You definitely want to be aware of what the appraiser says, but you do not need to feel like getting this type of loan will require you to be completely aware of how much the property will be worth after you make the needed repairs.
Another thing that you should realize is that hard money loans are only offered by companies who are hard money lenders. These are generally not the same companies that offer commercial or residential lending. If you try to buy a distressed property from a company that is not specializing in hard money, then you are going to be paying much more, generally. That is because they are considering it a much higher risk to lend to you.
The hard money lenders are in their own niche market. They know what they are doing, and have usually been doing it for years. They have a system for figuring out how much you are going to pay, and as long as you feel confident that you will be able to make the repairs, you may be as good as gold. You can sell the property when you are done at a much higher price then you paid for it. As long as you know what you want to do, then this situation can work out very well for you. You will be far better off using a lender that specializes in this type of loan rather than a lender who usually offers normal loans but is working with a distressed property at the current time.
The main lesson here is that you do not need to be afraid of hard money or lenders that specialize in it. If you are in the market for a distressed property that you want to fix up and sell in the future, you should explore these options. Not only can these loans be easy to obtain, but they can also pay off for you very well in the end. Even if you are paying higher rates, these can all come back to you when you sell the property after fixing it.
Contact us to see if you qualify for Hard Money Loans. Email us or call us at 800.842.2910