If you are ready to buy an investment property in Detroit, using a private lender may help you to reach your goals. However, there are things you need to watch out for. Learn more about hard money and private lenders in our latest post!
While many investors opt for a conventional loan when buying a property, a hard money loan can be used in the right circumstances. A hard money loan can be great for a house that needs a lot of work, something a bank will usually shy away from.
What Is Hard Money?
Hard money loans are used by investors, typically with the intention to be short-term. Private lenders will access your situation and ability to repay the loan. These loans are secured by real estate and will usually be repaid within 1-5 years. While some people will say it should be a last resort, using a private money loan can be beneficial for investors in many ways. In many cases, you will be able to save time, allowing you to jump on the amazing deals as they arise. While your competition is dealing with the hassles and headaches from the major banks, you will be able to secure a loan and make your offer.
How It Works
In order to work with the lender you want, at the terms you want, you’ll need to get all of your ducks in a row. Provide the lender with your plan, approximate costs, the timeframe, exit strategy, and how you will be able to repay. You’ll want to provide back-up for your costs and figured, being as detailed as possible. You should be able to provide a track record of other projects you have been involved with, along with their profit, timeframe, and overall outcome. Once you have proven your ability to repay the loan as well as the potential profit from the property you wish to buy, the loan will typically be funded right away. Working with hard money lenders means a faster process and little to no red tape. It is then up to you to pay back the loan as quickly as you are able to, thus avoiding the high-interest you may face with a private lender.
When you use a private loan to buy investment property, you won’t be at the mercy of the bank. Maybe you have found a fixer-upper you see potential in, but the bank doesn’t see it that way. When you choose a hard money loan, you won’t have to waste time on appraisals or the long drawn out process of working with some banks. Remember, that wasted time kills deals. Working with a lender who can move quickly may help you buy a great property before anyone else is able to. This will give you a huge edge vs. other investors in the community.
A hard money or private loan can help you when you need it most. The process is usually much faster than working with a normal bank, helping you get the money you need right away. Once you have found the right lender, you will be able to build a relationship with them, making things run even more smoothly. Using a private money loan has helped investors all over the Detroit area purchase investment properties that are building them wealth by the day!
What To Watch Out For
With a private loan, you may not be able to refinance as you might be able to with your bank. However, you can always take out a conventional loan when you are able to, paying back the hard money loan as quickly as possible. Just make sure you won’t be hit with any fees or penalties for early payment.
These private loans will often have a higher interest rate, so you’ll want to find a buyer or tenant right away. The idea is to turn the asset into an income-producing property as quickly as payable. You will want to pay off that loan right away, or take out a conventional loan when you are able to and the house is in better shape. not being able to flip
Keep in mind that every lender works a little differently. Don’t expect one to work exactly like another. Over time, you will be able to form a relationship with your hard money lender, streamlining the process and knowing exactly what to expect.
At Sell Inherited House Detroit, we work with great lenders and clients who are looking for investment property in the Detroit area. No matter where you are at in your investment career, we are confident we will be able to help you add only the best properties to your portfolio! Let us help you decide if a private loan is right for you!