Finding what appears to be an excellent opportunity for a real estate investment deal may mean that you cannot get the money quick enough from a local lender. You have limited time to make good on the deal but need a way to come up with the cash to complete the transaction. You may need to find a hard money lender to be able to get the money.
You are in a more urban area and know that there are some real estate investment clubs around. There does not seem to be any other options so you contact them, knowing that they may be very willing to help you if it is a good deal. You have also learned that a private investor could probably deliver the money within as short as just five days (in some cases).
One very important key in working a deal with private investors is to show them that it is a good deal – even if you cannot pay them back. For this to happen, there needs to be considerable equity in the property, which will enable them to make a profit even if they have to take the property back from you for lack of payment. Even then, you will most often be able to only borrow about 65 percent of the property's value after it is fixed up.
A large part of their consideration of the hard money loan will be the value of the property – not your credit. Although they will look at your credit score, the largest factor is the collateral. Since they are in it for the money, they are sure that they will make a profit even if you do not. However, if you handle it right, your investment in a good deal should also yield you a lot of profit for you, too. How much profit you get will depend on your expertise in real estate transactions, the market, and the amount of interest you pay to the hard money lender.
It is also important to know the difference between a hard money broker and a hard money lender. A broker is a middle man between the borrower and the private lenders. They may charge a fee upfront to even put you in contact with some private investors. This may not be refundable. A private lender, however, or lenders, has their own private money that they will use to help you finance the deal.
There are some Websites online that will enable you to post your request for a hard money loan and private investors will look it over and contact you if they are interested. Both brokers and private lenders keep track of possible deals, so you will need to know who you are dealing with before an agreement is made. Of course, simply posting your need does not constitute an agreement.
The private investor will evaluate the property before ever agreeing to give you a loan on the property. If he or she does not believe it is worth the investment, you will not get the loan. This makes it your responsibility to ensure that the amount you are asking for is in line with the typical private investor's expectations. Learning how to do this will come with time, and from talking with other people who frequently deal with hard money investors. Remember that they are in it for a profit, too.
Karl Stockton frequently writes on real estate, finance, investment and current events. This article was written for Compare Insurance Quotes; contact them in the future to compare contents insurance cover.