There are some investors who are looking for investments in other areas besides the stock market. They want to ensure that these alternative investments have reliable cash flow rates and risks that are manageable.
Private lenders may recommend that these individuals invest in hard money. These types of investments may be the type of investments that can help those who are looking for safer investments.
The Basics Of Hard Money Investing (Private Lending)
Hard money investments, also known as private lending, consist of loans such as rehab projects and bridge loans. These types of loans are secured by real estate, and they provide investors an easier and safer way to invest their money.
Bridge loans are considered short term loans, and they are often used to ‘bridge’ the period of time between the sale of one property and the purchase of another property. The typical time frame for a bridge loan is six months. However, the actual time frame can vary depending on circumstances.
Rehab loans are another type of hard money investment. These loans are used to make improvements on a piece of property. The funds used for construction are held in escrow until they are needed, and paperwork must be verified in order to prove that progress is being made on the improvements. The borrower of the loan usually either refinances or sells the property after the improvements are completed.
A hard money loan is the opposite of soft money loans. A hard money loan is often a valid scenario when a borrower and/or the property is not considered to be up to standards with traditional lenders. They do not meet the qualifications required,so they obtain loans that are based on salability and value of the property instead of the qualifications of the borrower.
Although all types of bridge loans are considered to be hard money loans, hall hard money loans are not bridge loans. They are often short term loans, but they can be financed as mortgages for those who do not meet the guidelines for VA/FHA or Fannie Mae loans.
What Are The Pros And Cons Of Hard Money Investment?
While bridge loans can be the answer for many investors who are looking for non-traditional investments, there are also other advantages as well. They include:
These loans are considered diversified because the rate of return is not controlled by the stock market or politics, and they have not been converted into other types of financial products (control). Investors can also enjoy the profits of their investments without having to wait years for the properties to become profitable.
There are also disadvantages to these types of loans/investments. It is important that investors due their diligence and research when they are ready to invest in bridge loans.
Investors should also only consider hiring the services of a reputable and proven company that will take the time to analyze deals for them.
Some investors may prefer the longevity of other types of investments, and bridge loans are designed to be short term loans. This is something to consider when contemplating this type of loan.
Hard money loans can help you add reliable and safe investments to your portfolio. Speak with an experienced consultant that can help you find the best type of hard money investment for your needs