Understanding The Real Estate Investing: Hard Money Vs Conventional Investor

Real estate investing: hard money vs. conventional investor is not as difficult topic as it looks to be at first sight. People get confused because they cannot differentiate between the hard money loans or HML and conventional investor loans or conventional mortgages. They keep on asking questions regarding hard money loans. Here are answers to those frequently asked questions that will be of great help in understanding the real estate investing: hard money Vs conventional investor.

How to Obtain the Hard Money:

The first question is regarding the working methods of lenders of hard money loans. HML helps in real estate investing by making asset based capital available to investors. The biggest benefit is the fast pace at which these HML work. You may receive the amount in as little as three days after furnishing all required documents. You can get hard money as loans against collateral security, for both residential as well as commercial purposes. If we compare it with conventional mortgage then we will find that conventional mortgage takes about 4 to 6 weeks of time in processing.

Interest Rates:

The second but very important question is related with interest rates. In case of hard money, the interest varies with the lender. The average interest rate is between 14 % and 18 % per annum. Most of the lenders require monthly payments. For a conventional investor this rate of interest for obtaining hard money is a little bit on the higher side.

You may get hard money for real estate investing up to the 70 % of the value of the property. The amount of loan can be as little as $ 25,000 and as high as $ 1,000,000 depending upon the case. Duration of loan is from 6 months to 12 months varying with your requirements and the conditions of lender. Some people ask that is it possible to make the interest payment at the end of the loan term. Although, some lenders have this kind of provision, yet it makes your presentation week because they believe that if it is difficult for you to make the monthly interest payments then you are not eligible for getting the loan.

As we are discussing the real estate investing: hard money Vs conventional investor, it is relevant to compare the monthly payments also. For every 100,000 dollars borrowed you will have to make the monthly payment of $1166.66 in case you opt for the hard money. While for the conventional investor, it comes to $1098.00 per month. When we compare the prepayment, it is possible in both the cases. However, in case of hard money time period is a minimum of 3 months, while up to 24 months in case of conventional mortgage.

Why Use Private Money For Real Estate Investing? Reason 1

I?ll never forget it? my Realtor phoned and breathlessly told me about a deal that was too good to pass up. He described the property and the price and I had to agree- it sounded like a fantastic opportunity. Sadly, I told him I had no ready cash, and my credit was already overextended. I would have to pass. I glumly hung up the phone.

This experience, several years ago, lead me to examine how I was financing my investment properties. Because I was tied in to using my own cash and conventional mortgages, I was severely limited in the number and kind of properties I could acquire. I decided then and there to begin learning all I could about private money for real estate investing.

I gradually began to develop a stable of private investors, partners really, who had money to loan and were ready to make it available to me at a moments notice. Since I started putting the principles of private money for real estate investing to work, I haven?t had to pass on a ?once in a lifetime? deal for financial reasons again.

A perfect example occurred a couple of weeks ago that illustrates what I?m talking about. Again, my realtor phoned and told me about a foreclosure listing he had. The bank had sold the property, but the deal had fallen through. These have always been great opportunities for me, and this was no exception. Thanks to the fact that I have access to plenty of private money for real estate investing, I knew just what to do.

With just a couple of phone calls, I had lined up the financing I needed to proceed with the deal, and I stand to make several thousand dollars on this property when I close on it at the end of the month.

That?s several thousand dollars I would have been forced to watch fly into the pocket of some other investor if I didn?t have ready access to a flexible source of cash, namely my private money lenders. I?ve got several who are friends now, and our deals are always win-win situations for all parties.

If you need another reason to start building a network of lenders who can provide you private money for real estate investing, this is one of the best.

Why Use Private Money For Real Estate Investing? Reason 1

I?ll never forget it? my Realtor phoned and breathlessly told me about a deal that was too good to pass up. He described the property and the price and I had to agree- it sounded like a fantastic opportunity. Sadly, I told him I had no ready cash, and my credit was already overextended. I would have to pass. I glumly hung up the phone.

This experience, several years ago, lead me to examine how I was financing my investment properties. Because I was tied in to using my own cash and conventional mortgages, I was severely limited in the number and kind of properties I could acquire. I decided then and there to begin learning all I could about private money for real estate investing.

I gradually began to develop a stable of private investors, partners really, who had money to loan and were ready to make it available to me at a moments notice. Since I started putting the principles of private money for real estate investing to work, I haven?t had to pass on a ?once in a lifetime? deal for financial reasons again.

A perfect example occurred a couple of weeks ago that illustrates what I?m talking about. Again, my realtor phoned and told me about a foreclosure listing he had. The bank had sold the property, but the deal had fallen through. These have always been great opportunities for me, and this was no exception. Thanks to the fact that I have access to plenty of private money for real estate investing, I knew just what to do.

With just a couple of phone calls, I had lined up the financing I needed to proceed with the deal, and I stand to make several thousand dollars on this property when I close on it at the end of the month.

That?s several thousand dollars I would have been forced to watch fly into the pocket of some other investor if I didn?t have ready access to a flexible source of cash, namely my private money lenders. I?ve got several who are friends now, and our deals are always win-win situations for all parties.

If you need another reason to start building a network of lenders who can provide you private money for real estate investing, this is one of the best.