Hard money loans are short-term finance sometimes used by professional real estate investors to purchase real estate. It is important to understand that experienced real estate investors know the ins and outs of hard money finance. Less experienced investors need to educate themselves on the subject of professional real estate investing so that they can make the best possible decision for their very specific real estate project.
Most real estate investors turn to hard money financing as bridge financing options between permanent financing and real estate acquisition, with a lack of conventional lending services available to real estate investors in today’s conservative credit landscape.
Benefits of Hard Money Multi-Family Financing
Flexible term structure, fast finance financing, and no prepayment penalties are some of the most popular benefits to getting hard money multi-family loans; This post briefly discusses some of the benefits of making use of hard money loans to purchase or refinance different real estate properties.
Benefit number 1:
No prepayment penalties
It’s important to understand that even the best-laid plans can actually change, hopefully for the better. The last thing a business company wants is to be penalized for its success if its business operations are doing particularly well. If circumstances change and the loan is paid in whole or in part before the due date, traditional financial institutions often charge heavy prepayment penalties. It is essential to understand that commercial mortgage lenders are fully committed to the success and structure of the borrower’s loan with no prepayment penalties or additional fees.
Benefit number 2:
Flexible term structure
Small and medium-sized businesses are constantly adapting to meet challenging and changing market circumstances. It is essential to mention that traditional credit bureaus and banks are not that flexible. Traditional lending institutions take a one-size-fits-all approach because of the interest of their shareholders and finance committees not to become over-leveraged or take on too much exposure. Some of the well known and reputable private lenders can structure the payment consistently. They can structure the collateral release terms in a way that is mutually beneficial to both the lender and the borrower. Greater financial flexibility often results in better results.
Benefit number 3:
Fast loan financing
It is very important to understand that it could be very difficult to try to obtain even the simplest loans from any financial institution in a subsequent economic downturn. Banks require borrowers to submit personal and business financial statements and up to 12 months of reserves from the anticipated new mortgage and personal expenses. This can result in unnecessary delays in loan approval. Private lenders can move quickly as they base their decision largely on the liquidation value of the collateral provided. Quicker decisions mean the borrower starts moving forward in the business instead of getting stuck in financing limbo.
