Hard Money Loans During the Credit Crunch
What is the Credit Crunch?
During these economic times hard money loans have flourished. All Dominion Mortgage has been successful in helping investors meet their real estate investment goals because we know how investors can make money in commercial and residential investment real estate using hard money or bridge loans. While sub prime lending has all but gone away hard money loans have gathered more steam. The reason is that banks and other financial institutions the offer conventional financing have suffered record losses and many of them have gone out of business. This is primarily due to the fact that they were lending at or near 100% value of the property. When there is no equity in a property there are limited options during a down turn in value and ultimately banks and people lose. The more that banks and investors in the financial markets loss, the tighter financing became. This tight financing reduces the profits for lending institutions because they make money originating loans which is not happening now. This then leads to more tightening and ultimately the credit crunch.
Hard Money Loans.
The private investors that lend these equity loans work on different criteria. First, these loans are short term in nature. The commercial and residential real estate investors who use bridge loans to finance the acquisition and rehab of their properties generally go into the loan with an exit strategy. With most bridge loans being only six months to three years in length the borrowers are prepared to refinance or sell the properties moving them from the books of the hard money lenders. Secondly, the key to bridge loan lending is the after rehab value. If the lenders are only lending from 50% to 70% of the after rehab value then if there is a problem there is plenty of room for a quick sale to other real estate investors and the lenders do not lose money. At these equity points even the real estate investor is protected because they have options they would not have if they were doing a high loan to value loan.
Credit Crunch and Hard Money Loans.
So whether you are financing commercial real estate investments or residential real estate investments the low or no money down bridge loans for investors are a viable option for you. Those deals that may have been financed through conventional lenders are being turned away because of limit funds and tighter credit policies, the hard money lenders are thriving. Many people believe these equity loans are only for people who are not of the highest quality, but that is furthest from the truth, especially during tight credit times. The bridge loans are based on the equity of the properties and the ability of the borrower to complete their project within a reasonable budget and stated time. When those keys are in place, regardless of credit, the properties become viable investments for hard money lenders.
For all of your real estate investment financing needs contact All Dominion Mortgage and Financial Services today. Email us at louisj@alldominionmortgage.com or leave a comment below.
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