Hard money loans are short-term finances that professional real estate investors sometimes use to buy real estate. It’s important to understand that seasoned 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 in order to make the best possible decision for their very specific real estate project.
Most real estate investors turn to hard money financing as a bridge financing options between permanent financing and real estate acquisition, with the lack of conventional loan services available to real estate investors in today’s conservative credit landscape.
Benefits of multi-family hard money financing
The flexible term structure, fast financing of finances, and the absence of prepayment penalties are some of the most popular benefits of obtaining hard money multifamily loans; This post briefly discusses some of the benefits of using hard money loans to purchase or refinance different real estate properties.
Benefit number 1:
No prepayment penalties
It is important to understand that even the best designed plans can change effectively, hopefully for the better. The last thing a business company wants is to be penalized for its success if its business operations are going particularly well. If circumstances change and the loan is fully or partially repaid before the due date, traditional financial institutions often charge hefty 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 temporary structure
Small and medium-sized businesses are constantly adapting to cope with changing and challenging market circumstances. It is essential to mention that traditional credit agencies and banks are not so flexible. Traditional lenders take a one-size-fits-all approach due to the interest of their shareholders and finance committees in not over-leveraging or taking on too much exposure. Some of the well-known and reputable private lenders can systematically structure the repayment. 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:
Quick loan financing
It is very important to understand that it could be very difficult to try to secure even the simplest loans from any financial institution in the aftermath of the economic downturn. Banks require borrowers to submit personal and business financial statements and up to 12 months of anticipated new mortgage reserves and personal expenses. This can result in unnecessary delays in loan approval. Private lenders can act quickly, basing their decision largely on the liquidation value of the collateral provided. Quicker decisions mean the borrower begins to move forward in business rather than being trapped in financing limbo.