What Are the Pros & Cons of Hard Money Lending In California

What Are the Pros & Cons of Hard Money Lending In California

Investing in real estate can be a profitable way of building wealth, and it is also a wonderful way to diversify your portfolio. Real estate investment trusts & real estate crowdfunding cann allow you invest passively, but some investors may prefer to own property directly.

If you aren’t comfortable spending a large sum upfront to buy real estate, hard money lending in California may be your best option.

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How hard money loans work?

Hard money loans are short-term lending instruments that real estate investors can utilize to fund an investment project. This sort of financing is usually a good option for real estate developers or house flippers whose objective is to revamp or build a property, and eventually sell it for a profit.

Hard money loans are given by private lenders instead of mainstream banks.

Unlike conventional bank loans, the capability to get hard money loan is not decided by the creditworthiness of the borrower. Instead, hard money lenders California use the property’s value to determine whether to provide the financing. Especially, lenders emphasize on the “after repair value”, which is an estimation of what the property will be worth as soon as the restoration or development stage is finished.

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However, there are 2 major downsides of hard money lending:

●Cost – No doubt hard money loans are expedient, but investors have to pay a price for this sort of borrowing. The rate can be up to ten percentage points higher than a regular loan. ●Shorter repayment period – The intention of hard money financing is to let an investor get a property ready to sell on the market as fast as feasible.

Thus, these loans have much shorter repayment terms than conventional mortgage loans.

The pros of hard money lending in California: Put the above mentioned 2 main drawbacks aside, there are many good reasons to consider availing a hard money loan. ●Convenience – with a hard money loan, it is feasible to get cash inside a few weeks. That is critical if you are funding a large-scale development project and cannot afford aberrations from the deadline to completion. ●Flexible terms – As hard money loans are provided by private lenders, it is feasible for investors to have more room for negotiation of the loan terms. ●Collateral – With a hard money financing, the property itself generally caters as security for the loan. But again, lenders may give investors a bit of freedom here. For instance, some lenders, may let you secure the loan employing personal assets such as residential property you own.

For complete Hard Money Lending help in California, do get in touch with All California Lending.