Are you an investor in the area, or an investor looking at the zip code? Then this is for you: here are 4 reasons why you should consider using a hard money lender.
Real estate investors know that investing can tie up your capital. For most investors, that can create challenges when your capital is all tied up: How do you operate your business? How do you deal with unexpected expenses? How do you grow?
You may have some different options to fund the acquisition or repairs but many investors are turning to hard money loans to help them. Here are 4 reasons why you should consider using a hard money lender…
4 Reasons Why You Should Consider Using A Hard Money Lender
Reason #1. Save Your Own Capital
The top reason, which we’ve already hinted at, is that using your own money ties up your capital and prevents you from running and growing your business. A hard money loan uses someone else’s money, which keeps your capital liquid so you can spend it to grow. Some investors with newly freed-up capital realize that they can actually do more deals now!
Reason #2. Leverage
As an investor, you’re probably familiar with the principle of leverage: getting a loan (such as a mortgage, or, in this case, a hard money loan) to pay for a large project, yet only needing to make small payments over time to pay the loan back. This makes it easier to take on large, costly projects without having to first save up the money.
Reason #3. Professional
Another way investors often fund their deals is through private lenders and investors who they know. However, if you do that long enough, you’ll learn that these private investors may require some extra hand-holding, or they might call you up in a panic in the middle of the night to get their money back because they need it quickly.
Bottom line, they’re nice people but they’re not professional investors. Hard money lenders are professionals who put their money to work and expect a return – they require paperwork and due diligence but they won’t be like those friend-and-family investors who fret night and day about their money.
Reason #4. Speed
Some investors just try to do it alone, using their own capital. When a repair comes up, they save up their money and when they have money they make the repair. But this can take a long time. It doesn’t make sense to delay generating a return on your deal; instead, borrow the money, make your repairs and generate a return on your deal sooner.
Running your real estate investing business requires capital – capital to run the business, acquire properties, make repairs and so on. Most people need extra capital and are reluctant to tie up all their money in a deal, which is where hard money lenders come in. If you’re trying to figure out whether you should borrow money for your next deal, you’ve just read 4 reasons why you should consider using a hard money lender.