Hard money loans are short-term finances that are sometimes used by professional real estate investors to purchase real estate properties. It is important to understand that experienced real estate investors know the ins and outs of hard money finances. Less experienced investors require to educate themselves on the subject of professional real estate investment so that they can make the best possible decision for their very specific real estate project.
Most of the real estate investors turn to hard money financing as bridge financing options between the permanent financing and the acquisition of a real estate property, with the lack of conventional lending services available to the real estate investors in today's conservative lending landscape.
Benefits of multifamily hard money financing
Flexible term structure, rapid funding of finance and no prepayment penalties are some of the most popular benefits to getting multifamily hard money loans; this post discusses briefly some of the benefits of availing hard money loans for purchasing or refinancing different real estate properties.
Benefit number 1:
No prepayment penalties
It is important to understand that even the best-laid plans can effectively change, hopefully for the better. The last thing a business firm wants is to be penalized for their success if their business operations go particularly well. If the circumstances changes, and loan is either fully or partially repaid before the due date, the traditional financial institutions often charge hefty prepayment penalties. It is essential to understand that the commercial mortgage lenders are completely invested in the success and loan structure of the borrower without prepayment penalties or added charges.
Benefit Number 2:
Flexible term structure
Small or medium businesses are constantly adapting to meet the challenging and changing market circumstances. It is essential to mention that traditional lending agencies and banks are not as flexible. Traditional lending institutions take a one-size fits all approach to all requests due to their shareholders and finance committees interest to not over leverage and or take on too much exposure. Some of the well-known and reputed private lenders can systematically structure repayment. They can structure the collateral release terms in ways that are mutually beneficial to both lender and the borrower. Greater flexibility of the finance often results in better outcomes.
Benefit number 3:
Rapid funding of loans
It is very important to understand that it could be very difficult to try to secure even the simplest of loans from any financial institutions in post economic downturn. Banks ask for the borrowers to submit personal and business financial statements and upward to 12 months of reserves of the new intended mortgage and personal expenses. This can result in unnecessary delays in an approval of the loan. Private Lenders can move quickly since they base their decision largely on the liquidation value of the collateral provided. Faster decisions mean the borrower starts moving forward in the business rather than getting caught in funding limbo.