If you’re eyeballing a prospective investment property to rehab and you need to finance it quickly, you might...
Hard Money and Private Money Bridge Loans
Like many people, you probably find the world of investment properties exhilarating. At the same time, you probably experience a lot of the frustrations that come with financing your prospective properties. As the real estate market continues to thrive, there’s a lot of scope for buying fixer uppers and flipping them for a profit. If you want to seize on your latest opportunity quickly, but you feel as though securing finance could cause a delay, you may want to consider a hard money or private money bridge loan.
What Are Hard Money and Private Money Bridge Loans?
Hard money and private money bridge loans are a form of asset-based credit you can access from private investors. Your lender is often a private investor who can see the potential in your project. They’ll grant loans that are worth up to 75% of your existing property’s value. Since you are borrowing from a private lender instead of an institutional lender, most real estate loans they come with slightly higher than usual interest rates. Depending on who you borrow from, they range between 6.900% and 11.000%.
When Will You Benefit from Using a Private Money Bridge Loan?
Let’s say you already own a property, and you haven’t yet sold it to acquire capital (or you don’t plan to), and another property catches your attention. A private money bridge loan will fill your financial gap so that you can make your investment. As most states don’t subject such loans to heavy financial regulation, you can receive funding in as little as three to fourteen days.
Thanks to their high acceptance rates and quick delivery times, private money bridge loans will benefit you if you intend on purchasing an investment property and selling it quickly. Where traditional investors and financial institutions see a financial risk, private money lenders see an opportunity. Many bridge loans don’t carry early repayment penalties. As such, although their interest rates are higher than usual, you can offset this by turning a quick profit and repaying early. Some borrowers can successfully repay their loans in as little as 30 days.
What Are the Benefits to Using a Hard Money Loan?
Traditional bridge loans typically require high credit scores. If yours is less than perfect, you may consider a hard money bridge loan. As a result, applying for one avoids credit footprints and the frustrations that come with putting your investment activities on hold while you attempt to secure a profitable property.
Should You Get a Bridge Loan Through a Private Broker?
Although it’s possible to access a hard money bridge loan on your own, the process can be lengthy and complicated. Additionally, a lack of industry knowledge and connections can also mean you have fewer options. In contrast, private loan brokers know how to quickly navigate the red tape that accompanies such loans. Alongside expediting the process, they can reach out to multiple investors and find the best option for your particular loan scenario. With more investment choices, your broker can secure a Loan-to-Value (LTV) rate between 60% and 75% of your current property’s value, giving you the chance to invest in a property that’s fit for development.
If you are under a time limit to perform and you want to expeditesecuring financing, approaching an independent broker for a hard money bridge loan is the smart choice. First Capital Trust Deeds can help you explore bridge loan financing options.