Securing the necessary funds, especially when time is important or the borrower’s financial profile doesn’t align with criteria from traditional lenders, is often the most significant hurdle for real estate investors. This is where hard money lenders (or private money lenders) step in as a lifeline for borrowers seeking quick, flexible, and accessible financing.
In this blog post, we’ll explore the reasons why a borrower might choose to work with hard money lenders to finance a real estate purchase or renovate a property to sell.
Speed and Efficiency
One of the main reasons borrowers work with hard money lenders is the speed at which they can secure funding. Traditional lenders often have a lengthy approval process that takes weeks or even months. On the other hand, hard money lenders are known for their quick turnaround times.
This quick access to capital can be a game-changer, especially in competitive real estate markets where time is of the essence. Hard money lenders such as HCS Equity can provide the necessary funds within 7-10 business days in most cases.
Flexible Approval Criteria
Traditional lenders typically rely heavily on an applicant’s credit score and income to approve a loan. Hard money lenders, such as HCS Equity, on the other hand, prioritize the real estate being used as collateral and the Loan-to-Value ratio. This means that even if the borrower’s credit score or income is not ideal, they may still be eligible to qualify for a hard money loan.
Unique Property Types
Certain real estate situations are better suited for hard money lending. For instance, properties needing extensive repairs or those considered “fixer-uppers” may not meet the strict criteria of conventional lenders. At HCS Equity, we’re more willing to finance these types of properties because we recognize their potential value after renovation. In some cases, we’re willing to finance both the purchase of a property and the necessary renovation or improvement costs.
Property Renovations and Repairs
Property owners looking to renovate or repair their homes or commercial buildings may find hard money loans to be an attractive option. Traditional lenders may be reluctant to finance renovation projects as they consider them riskier than standard home loans. HCS Equity, a hard money lender in California, on the other hand, often provide fix and flip loans or rehab loans, specifically for property improvements. This allows borrowers to enhance the value of their properties and, in turn, increase their equity.
Bridge loans are short-term loans used to “bridge” the gap between the purchase of a new investment property and the sale of an existing one. Borrowers in need of quick financing to secure a new investment property (before improving their credit score or making essential property repairs) can turn to HCS Equity for a bridge loan.
Once the old property is sold, they can repay the bridge loan and qualify for a traditional bank loan. This strategy is invaluable for homeowners looking to avoid missing out on an investment opportunity due to a delayed sale.
The Final Words
While hard money lenders may not be the ideal choice for every borrower, they offer a range of benefits that make them an attractive option in specific situations. From their speed and flexibility to their focus on the property as collateral, hard money lenders can provide the financing needed to achieve your real estate goals.
By understanding the reasons why borrowers may work with hard money lenders, you can make informed decisions and unlock opportunities that may have otherwise been out of reach.
Contact HCS Equity, a hard money lender in California to provide the financial solution you need.