Thing Every Property Investor Should Know About Hard Money

You have to know what you’re doing to make good money in real estate. As any seasoned property investor could tell you, there is a whole lot about this particular form of investing most people don’t know. Take hard money, for example.

Do you know the most important thing every property investor should know about hard money? If you do not, and you are an investor, here it is – hard money is private money.

So now you are thinking, “That’s anticlimactic.” You were expecting something much bigger; something much more profound. But keep reading. The implications of your investor financing coming from a private lender are huge.

Private Lenders Are More Flexible

Let us dig in by starting with the idea of flexibility. Go to any bank, and you will discover that your lending options are limited. Their menu comprises a static number of lending packages that don’t offer a lot of room for customization. You get what you get. If nothing on their menu works for you, too bad. You move along.

Contact a hard money lender and you will discover things are completely different. Private lenders aren’t boxed in by a predetermined package of loan options. They are free to make any kind of deals they wish . They have tremendous flexibility in just about every aspect.

Private Money Is Fast

In addition to being flexible, private lenders are comparatively fast. How fast? That is up to individual lenders. But allow me to cite an example from Salt Lake City’s Actium Partners. Actium once got a call on a Friday morning from a panicked investor whose bank backed out at the last minute. Closing was scheduled for Monday. To make a long story short, Actium got the deal done. The investor made it to closing on time and that was that.

No traditional lender could get from application to funding in a single business day. Private lenders can. They are regulated according to an entirely different set of rules. As such, they don’t have to go through a cumbersome underwriting process that includes multiple layers of approval. They can make decisions in minutes if they need to.

Private Lending Can Fund Anything

Property investors are familiar with strange deals and unique circumstances. In the investment game, no two deals are exactly alike. This creates problems for traditional lenders who refuse to get involved in certain types of projects. Private lenders don’t tend to have the same hangups.

Private money can fund just about anything. In fairness, firms like Actium Partners tend to specialize in certain types of projects. Actium’s specialty is commercial real estate. But there are other private lenders who specialize in fix-and-flip, residential rentals, land development, construction loans, and so much more.

Collateral Is the Most Important Factor

Finally, private lenders are able to make approval decisions based on any criteria they choose. The standard rule of thumb is collateral. Hard money loans are backed by investor assets – usually the property being acquired. If the value is there, approval is given.

Traditional lenders cannot do that. They are required by law to verify a borrower’s ability to repay. That’s why they leave no stone unturned when digging into an investor’s finances. It is why they want to see everything from tax returns to pay stubs to bank statements and loan contracts.

The differences between traditional and private lending are stark. For the property investor, the most important thing to know about hard money is that it is private money. That makes an enormous difference when it comes time to finance a new acquisition.