3 Reasons Property Investors Find Hard Money Easier to Get

Despite its name, hard money is actually easier for property investors to get than bank money. Hard money is private money managed by experienced professionals who specialize in lending for projects that banks either do not want to touch or cannot handle as well as their hard money counterparts. Needless to say that a core group of real estate investors trust hard money over any other form of financing.

Below are three reasons property investors find hard money easier to get. As you read, bear in mind that hard money lending is set-based lending. Decisions are made primarily on the value of the property being purchased. As long as both value and equity are there, hard money lenders can generally see their way clear to making requested loans.

Reason #1: Less Paperwork

Hard money lenders tend to require a lot less paperwork than banks, according to Salt Lake City, Utah hard money firm Actium Partners. This is because their verification and underwriting processes are much less complicated. Remember that hard money lender are concerned about collateral more than anything else.

Fewer paperwork requirements mean less back-and-forth between lender and investor. If you have ever purchased a house before, you know how important this is. Residential home buyers spend weeks answering document requests from their mortgage lenders. It can sometimes feel like there will never be an end to such requests. Investors don’t have that difficulty when working with hard money lenders.

Reason #2: No Income Verification

We need to keep going back to the fact that hard money lending is asset-based lending. As such, lenders do not jump through hoops in an attempt to verify borrower income. That is a big plus for investors. Why? Not because they don’t have income, but because their income is represented by capital gains.

Full time property investors do not necessarily draw a salary from an employer. They don’t have W-2 forms to verify their income. And on their federal tax forms, they may have no taxable income at all. The money they live on is what they earn from their investments. For taxation purposes, capital gains are not considered income. So it’s very difficult for investors to prove income to banks. They have money, they just cannot prove it with traditional documentation.

Hard money lending makes no such demands. A private lender couldn’t care less whether a borrower’s income is W-2 income or capital gains. The lender only cares that the borrower has a valuable asset, sufficient equity, and an exit strategy.

Reason #3: Lenders Aren’t Afraid of Property

Last but not least is the reality that hard money lenders are not afraid of property transactions. The most experienced among them know the property inside an out. They know how the market works. They know what their risks are at any given time. Funding property transactions do not scare them all.

Banks are not necessarily terrified of property transactions, but they lend for much longer periods of time. A typical bank loan has a term of between 15 and 30 years. That is a lot of risks spread over a long time. Hard moneylenders operate on much shorter terms. Generally speaking, 36 months is the max. Most hard money loans are between 6 and 24 months.

These three things combined make hard money easier for property investors to come by. Do not believe for a minute that hard money is a funding option of last resort. It is anything but. For many property investors around the country, it is the first and best option for funding new investments. That is why they use it.