Hard money lending can be an excellent way for real estate investors to build wealth. If you have a high income, excess cash in the bank, and experience in real estate investing, you could offer investors private money loans. Becoming a hard money lender in real estate can provide high gains and fast returns. However, like most potential investments, they come with a high level of risk.
If you are serious about becoming a hard money lender offering hard money loans, there are several key factors to consider. After all, weighing the pros and cons of any investment is crucial to assess if it’s the right strategy for you. And learning about the intricacies of lending your money to other investors is vital.
This article explains what is involved with private money lending and will hopefully help you make an informed choice if this investment strategy is for you.
What Is a Hard Money Lender?
A hard money lender is a private lender who provides short-term, secured hard money loans to real estate investors. Also called private money lenders, they lend money with high interest rates, typically using the property as collateral. “Hard money financing” refers to the tangible asset used to back the loan’s value.
Unlike a conventional loan, securing a hard money loan involves a faster, less stringent approval process. Therefore, hard money loans are highly attractive to real estate investors, especially those who cannot get financing through traditional mortgage lenders like banks, mortgage brokers, or credit unions.
For example, hard money lenders may forego a credit history check and close the deal in a few days rather than a month or more. However, because greater risk is involved, hard money loan rates are higher than traditional loans. This fact makes hard money lending an attractive investment opportunity if you can provide loans.
Hard money lender vs. private money lender?
Technically, a hard money loan only uses the real estate as…
