Real estate investment can be a lucrative industry, but requires working capital to get started. While a traditional mortgage may be appealing, the structure doesn’t always work for commercial investment. Fortunately, you can get the flexibility you need with bridge loans for real estate.
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What Are the Benefits of Hard Money Loans?
So what can hard money loans offer that a mortgage can’t? First of all, they’re incredibly flexible. Commercial property investment takes a variety of forms, each with its own financial needs. While the terms vary among loan types, they tend to accommodate the most common needs: speed, short timelines and simplicity.
Quick Access To Cash
When you invest in property, fast access to cash can be a huge boon. For one, it allows you to jump on business opportunities. Second, it gives you an advantage during negotiations. For example, a seller may be willing to accept a lower bid because the funds are immediately available. You may also be able to beat out other bids because the seller values a quick closing.
Hard money loans offer incredibly quick approval times, especially when compared to traditional financing options. The mortgage application process can take over a month to yield an answer while you can get cash within days with a hard money loan.
Short Term Options
Hard money loans are designed to be repaid quickly once you make a profit. That means you don’t have to worry about getting locked into a 30-year term — most hard money loans last 2 years or less.
How do lenders manage to approval loans so quickly? Private lenders require less paperwork than traditional lenders such as banks or credit unions, who have many strict regulations tying their hands. In contrast private lenders have more leeway; they may be more interested in the value of the property than your debt-to-income ratio or credit history.
What Type of Loans Are Available?
Before you look for a hard money lender Los Angeles CA, it’s important to know what type of financing you need. There are many different options out there, all with their own pros and cons.
Fix and Flip Loans
One of the most common loan types, fix and flip loans, covers the cost of purchase and rehab. You can make a nice profit from renovating a property, then selling it.
Bridge loans are a stop-gap measure commonly used to purchase new real estate before old property sells. Just keep in mind that the interest rates may be higher than other options. Bridge loans may also be more difficult to qualify for.
Buying property from an estate sale is a great idea since you’ll likely get it for a fraction of the value. However, to get a chance to bid, you must prove you have funding. Trust loans are designed to meet the strict financing standards required for auction participation.
Now that you’ve got the basics, you can confidently seek out hard money lenders California. Make sure to do your research and look for the best deals. If you’re smart about your investments, you’re sure to find success.