Hard Money Lenders-Predator or Savior?

Real Estate Broker/Owner with Fierce Realty Corp RM424134

There are two myths about hard money lending that I like to address today. One, hard money lending is the best way to get funding for a fix/flip. Two, hard money lender prefers to foreclose on your investment rather than collect the high interest payments.

Hard money lending is misunderstood by new investor. It's unfortunate because it can be easy to navigate if understood properly. 

The myth that hard money lending is the only way to go when buying a fix/flip is inaccurate. There are several sources of funding to seek out first and foremost before selecting a hard money lender. However, after all resources have been tapped and your only option is a hard money loan, you must be educated about the terms. Hard money lenders are in the business of making money on the high interest rate on the loan that they give you. They are not interested in owning the real estate itself via foreclosure. However, that can happen if the loan payments are not paid. If you are not an experienced investor, I do not recommend that you obtain a hard money loan for a fix/flip. Most new investors lie to themselves about what is required to renovate the property and sell for a profit. They also lie to themselves about the turnaround time to put the newly renovated property on the market for resale. I had a client who took 3 years to renovate a home that was supposed to only take 6 months and unfortunately one of the partners passed away from what I believe to be the stress, before it was eventually foreclosed on by the hard money lender.

Don't let that be your story. Consult with a real estate professional before investing and getting a hard money loan.



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