Getting started in the real estate business as a new investor can be pretty challenging, especially if you lack finances, experience, proper property valuation skills, among other things. Many new real estate investors quit the investment due to frustrations and struggles of finding reliable cash flow.
New realtors can get a jump start by applying for hard money lenders’ short-term loans, known as hard money loans. Unlike bank loans, they have fewer requirements and focus on the asset’s value.
Read on how to start real estate investing with hard money loans.
Initial Contact or Loan Application
Once you search for hard money lenders near me, you can apply for the loan right away. The lenders like Asset Based Lending will check your experience in the real estate business, financial strength, and credit background. They will also consider your asset’s current and future value before asking for a summary of your proposed deal. This information helps them check if you meet their underwriting standards.
Also, it is essential to share the property location, price, new construction budget, expected profit, payoff plan, and exit plan. This information is crucial in the initial stages of the loan application. It helps the lenders decide if to give you the loan or not.
The Underwriting Process
If you meet the underwriting standards of the hard money lenders near you, you are walking towards your success in the real estate business. At this stage, you will be filling out a loan application form to provide a purchase contract for the property and the expected scope of work.
The lenders will send an expert to inspect the property once you complete the loan application process. You also are requested to present documents related to your experience, available cash, income, and credits, as well as the contractor and insurance documents. The lender will start closing the deal once they have all the documents. However, the process can begin assuming that some are on their way if necessary.
Loan Closing or Loan Approval
Mostly, loan closing happens in the attorney’s office; at this stage, two transactions occur: the property purchase and loan settlement. You will also sign several related loans documents like a security agreement, personal guarantee, and investment affidavit, among other documents.
After signing all the documents, the lenders will approve the disbursement of the loan proceeds either to an escrow agent, the seller of the property or directly into your account.
How Hard Money Lenders Work
Hard money lenders release money for the project in installments; once one stage of the construction or renovation is complete, the lenders send an expert to inspect before releasing funds for the next stage. Therefore, working with hard money lenders near me ensures that they can easily access and review the property.
Loan Payment or Payoff
The lenders work with settlement agents to ensure the payoff process is as timely and straightforward as possible. However, hard money lenders do not require penalties for paying their loans before maturity. If you are able and want to pay off your loan before the agreed time, the lenders will happily receive your payments.
Final Thought
Real estate is among the top rewarding investments. If you plan to try your luck in the real estate business, hard money lenders near me can help you navigate financial challenges that cripple new realtors.
