How to Get Hard Money Loans for Bad Credit Landlords
If you’re a landlord, interested in flipping properties in Burbank to sell them for profit, and are going through a crunch with bad credit, then do we have a solution for you! Three words: hard money loans. It’s the easiest form of borrowing cash instantly without going through the hassle of credit history check, proof of personal income and whatever else that mortgage lenders ask for. It’s a breather for landlords looking for a way out of their bad credit situation. What is hard money loan? Is it for you? Do you really need to go for this option? How will you pay back? No worries, we’ve got you covered in the following sections.
Hard Money Loan for Bad Credit Landlords
Hard money loan is an alternate form of lending offered by private individuals. They lend cash based on the collateral you provide against the loan. They’re not concerned with your bad credit history or personal income, although they do ask for your means of earning. The extent of your loan depends on your loan-to-value ratio (LTV) of your collateral which should be around 50 to 70 percent.
Why Hard Money Loans
You might be wondering why would anyone want to give loan to an individual with bad credit history. Well, for hard money lenders, unlike traditional mortgage companies or banks, their concern is how quickly they can sell the collateral you provide to recover their losses, in case you default. On the other hand if you don’t default they make a hefty interest income on top of the loan, and let us tell you, it’s quite high compared to other lending institutions.
Hard Money Loan as a Lending Option
Hard money loans for bad credit landlords maybe the ideal solution for fast cash and even faster return projects. If you’re a landlord looking to renovate a distressed property to sell it for a profit then this is a great option. You don’t have to actually pay anything but still manage to get a profit when you sell your revived property. If you’re landlord who’s short on your down payment for a mortgage of second property for rent then, hard money loan is a fast way to get cash. However, the catch is, hard money loan is not a long term lending solution. It’s a quick fix. You can get the loan for a period of one to five years only; you wouldn’t want it any longer since the interest rate is so high anyway. So think carefully when you go for it.
Downside of Hard Money Loans
Of course with every type of investment there are the positive and negative sides. One of the most important aspects of hard money loans for bad credit landlords is that it’s expensive. You may be able to borrow a lot cheaper from the housing loan authority or local mortgage company but you’ll have a long wait. Whatever benefit hard money loans provide for quick processing, is made up by high double digit interest rates. Moreover, the longer you take to return the loan, the more interest you have to pay. So you can’t really use it for long term projects like buying a property for living in it or mortgage to rent.
If you fail to pay the loan, you can lose your asset in an instant so think carefully before putting up a property as collateral.
Where to Get Hard Money Loans
The best way is to ask your local bank for patching you up with investors who provide hard money loans. They’ll have no qualms in helping you out considering they will not be able to provide you the loan themselves.
Alternately, you can ask your property management company in Los Angeles who will have a list of their own to help you out. Moreover, you can also go to the real estate investment groups in the local chamber of commerce to connect with them directly. These groups are specialists who are there to invest their money in quick fix projects and to earn from them. Considering hard money lenders operate in private capacity, you can negotiate to strike up a customized term with them that fit your needs.
