For many individuals, growing their wealth involves investing to achieve higher returns over the life of their investment. One of the most common investments that individuals tap into is real estate. It is known for growing in value, as well as the regular rental income from your real estate portfolio. In San Diego, the rising rents make real estate a valuable investment option.
However, it can be difficult to determine the best way to purchase your real estate investments in terms of financing them. While some individuals prefer all cash purchases, others see financing as a viable option to quickly grow their portfolio. One of these financing options involves using hard money loans. Below are 3 keys to understanding how hard money loans can help you to increase your real estate portfolio.
Based on the Property Not Your Credit
If you are just starting your real estate business, then it likely does not have a significant credit history, making it harder for you to get financing through traditional banks or lending options. Hard money lenders are private lenders, so they are not focused on credit scores, but on the value of the asset you wish to purchase.
Plus, this gives you the opportunity to make repairs that build the equity of the asset before you attempt to refinance it through conventional financing means. Your credit also can be improved by making regular, on-time payments to your hard money lender.
Faster Financing Option with Flexible Terms
For many hard money lenders, the application process is much shorter, allowing you to get funding in a matter of weeks. This benefit can be key when you are funding an expansion or renovation of assets within your portfolio.
They also offer flexible terms, which can be an appealing option for those want room .to negotiate. You also can likely borrow more than you could through a conventional financing option. The trade off is that you are likely going to have higher interest rates and fees to offset the risk of financing your investment.
Depending on the hard money lender, you may not even have to provide a down payment, although you could be required to pay specific fees and closing costs. There may also be no prepayment penalty for paying the loan off early.
Establish a Relationship
Using a hard money lender, you can build a relationship, one that can help you to negotiate better terms for your loans in the future. Additionally, you have a few years to build up your business, thus allowing you to reach out to conventional lenders and secure a line of credit that you can use for future purchases.
When it comes to building a real estate portfolio, the point is to recognize that you are building a business. Therefore, working with a hard money lender can help you to make connections that can help your business grow. Using hard money lenders can be a great way to start building your real estate investments.
If you are interested in finding out how a hard money loan could benefit you and your real estate investment business in San Diego, then contact our experienced staff today. We can help you to determine your financing options for your next real estate investment.