Real estate investing can be a well-paying avenue for acquiring wealth. It can also be an effective way to diversify one’s portfolio. While some investors still prefer owning property directly, it is not a secret that real estate crowdfunding and REITs (real estate investment trusts) allow for passive investment.
When not comfortable with shelling out and paying up a substantial sum of cash upfront for real estate purchases, the hard money loans Connecticut may be the solution. Hard money loans Connecticut has some edge over traditional financing for some. This type of loan has potential downsides and still requires a certain capital buffer.
How Hard Money Loans Connecticut Do the Trick
Hard money loans Connecticut are short-term lending avenues that investors in real estate can utilize to finance an investment project. Sometimes it is referred to as a bridge loan. This kind of loan is often used by “house flippers” or real estate developers to refurbish or develop a building or property and sell it to gain profit thereafter. More often than not, hard money loans Connecticut are given out by private lenders as opposed to mainstream financial establishments like banks and cooperatives.
The ability to get a hard money finance lender to approve a hard money loan is not dependent on the borrower’s creditworthiness unlike traditional financial loans (especially from banks). Hard money loans Connecticut lenders instead use the property value itself in assessing whether to approve the loan or not. Often, hard money lenders look at the ARV or “after repair value” – an estimate of the property’s worth once the renovation or development is completed – to gauge their decision to lend hard money loans Connecticut.
The Disadvantages of Turning to Hard Money Loans Connecticut
In all honesty, hard money loans Connecticut is not an out-and-out financial solution. There are primarily two drawbacks to keep in mind.
- The Cost of Hard Money Loans Connecticut
Yes, hard money loans Connecticut is convenient but it may be owed to the price investors need to pay for borrowing this way. The borrowing rate can be up to 10% points higher compared with conventional bank loans. A lot of other fees are going to cost investors including loan-servicing fees, origination fees, and closing fees.
- The Shorter Period of Repayments for Hard Money Loans Connecticut
The usual objective of investors turning to hard money loans Connecticut is to allow them to ready a property to go on the market at the earliest possible time. Consequently, the hard money loans Connecticut presents much shorter terms for repayment compared with mortgage loans obtained from traditional means.
When choosing a hard money loans Connecticut lender, it can be an edge to have a clear picture of when the property will be rendered profitable to make sure that the loan is repaid on time.
The Advantages of Availing Hard Money Loans Connecticut
Considering several good reasons, getting hard money loans Connecticut instead of traditional bank mortgages may prove more beneficial. Here are the primary advantages that are offered for investors availing of this lending option.
- The Convenience of Obtaining Hard Money Loans Connecticut
Applying for a conventional mortgage is rather time-consuming, particularly owing to new mortgage lending regulations enforced as a chunk of the Dodd-Frank Act. To close a loan may mean taking months for its approval and this may put investors at risk of losing out on certain investment properties.
With hard money loans Connecticut, it is not far from possible to get funding in just weeks. This consideration is a matter of importance, especially when funding large-scale projects that cannot afford delay from the timeline to end or accomplish.
- The Flexible Repayment Terms of Hard Money Loans Connecticut
Hard money loans Connecticut is offered by private money lenders and because of this fact, real estate investors can have a wiggling room for negotiation on loan repayment terms. Real estate investors may be able to tailor schedules of repayment to fit their needs or warrant certain fees, like the origination fee, reduced or wiped out during the process of underwriting the hard money loan.
- The Peculiar Collateral of Hard Money Loans Connecticut
With hard money loans Connecticut, the real estate property itself serves as the collateral for the hard money loan. Again, remember that hard money lenders may allow investors some leeway here and there. Some hard money lenders, for example, allow real estate investors to secure the hard money loans Connecticut using personal assets like owned residential properties or their retirement accounts.
What Hard Money Loans Connecticut is Commonly Used For
Here are the most common reasons an individual real estate investor seeks out hard money loans Connecticut.
- Flipping A House or Property
Main personalities who utilize hard money loans Connecticut are real estate investors looking to buy low-cost properties (usually needing some fix-ups, value-upping repairs, and renovations) and flipping the home or property to profit from it.
Usually, these projects happen very quickly. Professional house flippers often resort to hard money loans Connecticut as a faster form of financing. These house flippers often look to sell homes within a shorter time and so they do not need lengthy loan repayment terms like the ones offered in a traditional mortgage.
- Acquiring Investment Properties
Individuals and entities looking to invest in rental property but do not qualify for conventional financing may turn to hard money loans Connecticut to capitalize on their investment. The method of financing offered in hard money loans Connecticut can be proven useful for those who can’t get traditional loan approvals owing to their credit history and those who need more funds than what conventional lenders will grant them.
- Acquiring Commercial Properties
Similarly, business owners may resort to hard money loans Connecticut to fund their plans to acquire commercial real estate. This may be the case if they are unable to secure financing from traditional methods. Hard money loans Connecticut may prove useful for entrepreneurs buying a unique property that may not qualify for bank financing or those who learn that traditional commercial loan limits are way below their funding needs.
What to Expect as Rates for Hard Money Loans Connecticut
Hard money loans Connecticut is quite pricey as mentioned. Comparing interest rates for hard money loans and conventional types of loans, one may think about its financial risks as well.
The average rate for a mortgage with a 30-year fixed rate is around 3% while hard money loans can have interest way above 8 to 15%.
Still, real estate investors need to keep in mind that how expensive hard money loans Connecticut depends on the preferred LTV or loan-to-value ratio of the hard money lender.
