Real estate investors in Massachusetts have a lot of financing options available to them, but one of the most attractive is the hard money loan. Hard money loans offer a number of advantages over traditional financing and can be an invaluable tool for Massachusetts real estate investors.
Real estate offers portfolio diversity, and with careful planning and following a strategy, investors can build great wealth and financial freedom. Diversity can protect you from economic downturns in any one sector of the market, and real estate allows investors to live out their golden years on their terms, doing what they enjoy. In addition, passive income in retirement earned through real estate investments offers a hedge against the ravages of inflation because rental rates tend to keep pace with increases in the cost of living.
A hard money loan is a type of loan that is secured by real property. Unlike traditional loans, which are typically secured by the borrower’s personal assets, hard money loans are secured by the real estate itself. This makes hard money loans attractive to real estate investors since they are able to access the funds without having to pledge their personal assets as collateral.
Hard money loans or bridge loans allow investors a quick and flexible solution to hold onto their cash while building their holdings using cash from someone else, a private money lender. This short-term financing option is typically to rehabilitate or develop a property and then sell or flip the property. Read on as we explore what Massachusetts real estate investors need to know about hard money loans
The Cons
As with most things in life, you should consider both sides of what Massachusetts real estate investors need to know about hard money loans, including the drawbacks, though they are few. Hard money loans also come with a higher interest rate and have higher costs in general for processing.
Additionally, they are for a shorter term than conventional loans, from between one to three years. If you don’t have around 25 to 30% to put down, they may also seek an interest in the property. With high payments due to the interest and short duration of the loan, an income stream from a sound investment helps repay the loan and save money.
Hard money loans in Massachusetts often come with strict repayment terms. These loans usually come with balloon payments, which means that you have to pay off the entire loan balance in one lump sum at the end of the loan period. This can make it difficult to budget for the loan, and it can be difficult to pay off the entire loan in one payment if you don’t have the cash available.
Hard money loans are not always the best choice for people with less-than-perfect credit. Because these loans are secured against a property, lenders may require a higher credit score or more equity in the property as collateral. This can be difficult for people with bad credit or little equity in the property.
Make sure you fully understand the agreement and have performed due diligence on the investment property. The asset, or the property, is the security for the loan, meaning it is at risk should you default on the loan.
Conventional Loan Denied
For those who cannot pursue a conventional loan because of the risk of the investment or their credit status, Massachusetts real estate investors need to know about hard money loans, which offer flexibility because of their looser restrictions and the differing requirements for loans than conventional lenders.
For Massachusetts real estate investors who cannot pursue a conventional loan, hard money loans offer an attractive alternative. These loans present fewer restrictions and requirements than traditional financing and can be a great way to quickly finance an investment.
Quick Process
Another thing that Massachusetts real estate investors need to know about hard money loans is a quick application and approval process. The application and approval process is much faster than with traditional bank loans, making it a great option for those who need to act quickly on an investment. With hard money loans, investors can get the funds they need to start or expand their real estate investments. They make a great option to keep your investment business rolling with fast and convenient access to cash.
Experience Matters
Something else Massachusetts real estate investors should keep in mind about hard money loans in Massachusetts is that you can improve your standing by working with the same hard money lender repeatedly your interest rates can go down. As you gain experience, proving your ability to make successful investments, you become less of a risk.
Overall, hard money loans can be a great option for Massachusetts real estate investors who are looking to capitalize on opportunities quickly. However, it’s important to consider all of the factors involved in this type of loan and to keep in mind that working with the same hard money lender can potentially result in lower interest rates.
The professional investors at Deal Edge Properties are local Massachusetts real estate investors with the know-how to help you understand how hard money loans can benefit your real estate portfolio. If you’re ready to start, let the professional investors at Deal Edge Properties help guide you as you learn the ropes of real estate investing or help you handle your investments to sit back and enjoy your passive income. Let us help you find great deals in Massachusetts, don’t forget to ask about the current inventory at Deal Edge Properties of the best investment deals available. Whether you are investing in flipping or needing help managing your properties and everything in between, at Deal Edge Properties, we have a network of highly regarded local providers who offer a solution to get the job done right. Call Deal Edge Properties at (978) 274-0555.