People who are investing in the real estate business mostly apply for hard money loans. They do this when they want to buy out a property or repair one that already exists. They prefer these loans because they process fast allowing them to get the money and acquire the property they want and start doing business immediately. Hard money lenders will however not give out loans without looking at a number of things, which is part of the procedure of ensuring that the loan will be fully serviced. Even though their interest rates are high, they have proved to be of great help to investors who need liquid cash.
One of the requirements of getting a hard money loan is your “scope of work’. This is usually in the form of a worksheet that details all the activities you intend to use the money on and the estimates, if the project is that of repairing houses. It is advisable to put the estimates on the higher side so that you do not have deficits, as this will discredit your worksheet. The lender will assess the repairs you want to make before putting up the houses for sale. The lender will also require you to have at least 20% as a down payment of the hard money loan. The property you are investing in will serve as collateral. The loan usually amount approximately 65% of the value of the property and if you need a larger loan, then you will have to provide additional collateral called cross collateral. The lender will look at your bank account just to determine how much money you have which will help him in deciding whether you qualify for the loan. The amount of monthly income that you will be getting from the property is however important.
These are some of the considerations that hard money lenders have to keenly look at so that they do not suffer defaults. This should however not be a reason to scare you from approaching these lenders when you are in need of money and you are confident that the investment you are going to engage in will prosper. There are times when you are not sure if the business you want to indulge in will bring good returns, but we are living in a world where doing business is a gamble, and you have to convince yourself that you are ready before approaching it head-on.