Articles related to lending possibilities on current market.

Why Finance with a Hard Money Loan

There are some people who will never need to borrow against any property they own or finance a property they are planning to purchase with a hard money loan. This can be attributed to great credit and great income levels or never having the need to “get the money fast” due to circumstances requiring urgency or immediacy.

Then there are people that don’t have perfect credit or those that don’t have the monthly income needed to satisfy the typical approval profile of the big banks or institutional lenders. Their alternative is to seek a hard money loan.

What is a Hard Money Loan?

shutterstock_121679242A hard money loan is an asset-based loan meaning the collateral for the loan is an asset, typically a property. A hard money loan is issued to borrowers who cannot qualify for a bank and/or institutional loan because of poor credit scores or lower-than-accepted monthly income levels. Hard money lenders, like Westar Financial Group, fill the void and are there to help with the assistance of private investors and private investment companies by their side.

While the interest rate and mortgage loan costs are typically higher for hard money loans (because of the higher risk involved in financing the loan) many of the negatives associated with them are offset with the benefits attributed to the use of the money borrowed.

The Benefits of Hard Money Loans Come From What You Do With The Money Borrowed

Loaned money can be used for most any purpose such as paying off higher interest rate loans or credit cards. Paying off a higher rate with a lower rate will save money. That’s easy to understand. Other benefits include starting a business or investing in additional real estate. If the business is successful or the investment property goes up in value or provides positive monthly cash flow then the use of a hard money loan has benefited the borrower.

Then there are those situations where the benefit is simply the receipt of the money needed to pay obligations or supplement living expenses when life gets a little rough. The use of a hard money loan to fill a money gap in life should only be considered as a short term solution since there is a monthly interest payment due that just might become an additional financial burden if monthly income is not increased or augmented to offset the costs associated with the loan.

Interest Rates On Hard Money Loans

Interest rates on hard money loans can be up to 10% higher than the rates offered by banks or institutional real estate lenders so it is advised to use the proceeds of the loan prudently and carefully.

One of the situations where a hard money loan is currently employed is where active buyers of distressed properties simply do not have the luxury of time to get a bank loan or the banks are not lending on speculative real estate investments or where there exists more potential deals than money possessed by the interested buyer. So often a buyer will purchase property “A” for cash but then property “B” comes along and the buyer doesn’t have enough money to the buy it but there appears to be enough potential profit to justify any financing costs. So the buyer will typically borrow money on property “A” and use the proceeds to purchase property “B”. The profit derived from property “B” more than offsets the costs of money from the hard money loan.

If property buyers are successful in the home buying business, they will eventually accumulate more money as more deals are consummated so the need for hard money will decline as they become more successful.

But sometimes in life opportunities just keep coming in, so the funny thing about money is you just never have enough.

Opportunity is Knocking

shutterstock_273084119With the current improvement in the California real estate market it just might be a good time to look into using the equity in your home to purchase a second property. The equity in your home can be used to get the down payment money to purchase that new property.

Many people have suffered from the mortgage meltdown that began in 2007 and from the overall real estate recession by losing their homes. So many people have been put in the position of going from being property owners to being renters. This recent event has caused an imbalance in the supply and demand ratio for available rental properties currently on the market. This has caused monthly rental amounts to increase and has provided the opportunity for real estate investors to take advantage of higher monthly rents. With current mortgage interest rates (now at historical lows) triggering lower monthly mortgage payments, the definite possibility exists for positive monthly rental net income.

Most institutional lender are not currently providing financing for cash out which many potential homeowners need in order to purchase an investment property. Private real estate financing does not live by the same constraints that the big banks or large institutional lenders are required to operate under when making lending decisions.

While the interest rates for private real estate financing are higher than traditional financing sources the opportunity that the current real estate market is offering far outweigh any additional interest rate expense.shutterstock_97730039

With one call and a few minutes over the telephone our company can calculate the costs associated with purchasing a second property and determine the ongoing monthly expenses from owning and managing a rental property. We can show you the amount of monthly rental income you can earn each and every month which would be in addition to any increase in property values leading to an appreciation in your net worth.

The old adage that “a rising tide lifts all boats” apply so perfectly to the real estate market. Owning one property when the real estate market goes up will get additional equity resulting in increased net worth. But when two properties are owned the owner gets a multiplier effect of having two properties increase in value leading to increased equity in both properties and an exponential increase in net worth for the benefit of the property owner.

It is so true two is better than one!!!!

Nothing Ventured Nothing Gained

Starting a business is the dream of many Americans, the risks are high but the rewards can be great.

Money is always a necessary evil for anyone when they take that deep breath and make the decision to live the American Dream and start a business.

Starting a business almost always requires a substantial sum of money from the person attempting to get a business off the ground – money that many would-be business owners just don’t have. Sources such as family and friends can lead to disappointment due the their lack of excitement in the new business venture.shutterstock_70442032

Potential business owners then often turn to “their” bank thinking that it can’t wait to jump in and fund their new business venture. Many future business owners might have poor or even bad credit when deciding to start their new business ventures – credit that their bank just might not find inviting when reviewing the loan application for the new business.

Well unfortunately, traditional lenders do have very stringent lending standards when lending to a new business, primarily due to the fact that so many businesses fail in the first several years and many lenders in the past have gone down with the ship with the business owner when the business failed. So naturally, lenders are very careful in what business they lend on and who they lend to.

Potential business owners can look to lending sources that don’t require the same stringent lending standards that the big banks do when lending money, lenders that will lend to business owners with poor to bad credit or have had a business failure in the past.

Equity lenders will lend the potential business owner the necessary money to get the business up and running based on the equity in the real estate they already own. Business owners can use their personal residences, rental properties or other investment properties to obtain the money needed to get things going.

The interest rates on equity loans are higher than traditional banks but when the money is used wisely for a business that has a good product or service that is in demand then the cost of money would be considered a wise business choice if it leads to a successful business and profits to the business owner. Later on, when the business is humming along and the need to expand the business arises then an equity loan can once again be used to finance the business expansion and thus provide the business owner additional profit.

Equity = Business Profit

Now go out and get that business going!!!!