Hard Money Lenders vs. Traditional Financing for Rental Property
With interest rates continuing to rise, it has become a bit more difficult to secure financing for real estate purchases. This is the case for both consumers and property investors. So, if you’re in the process of purchasing (another) rental home or unit – and you need to borrow money to close the deal – does it still make sense to use a “traditional” bank or lender, or would an alternate route be better?
In some cases, a hard money loan might be the way to go. Rather than going through all of the red tape for getting a mortgage through a bank or lending institution – such as a credit check and review of your personal finances – hard money lenders instead base their loans on the value of the property, which is then used as collateral.
Hard money lenders are typically private individuals or companies that are more apt to take on more “risky” ventures in return for a higher payoff – in this case, a higher interest rate on the borrowed funds, as well as the potential to obtain the underlying property if the investor does not make good on their payments.
Oftentimes, hard money loans will have short terms, during which time the investor either “flips” the property (ideally for a profit) or refinances it through a mortgage with a lower interest rate and/or longer term. With that in mind, hard money loans could offer you the opportunity to secure a piece of property, and from there come up with a longer-term strategy.
If you own – or you plan to purchase – residential rental property(ies) in Orlando and/or the surrounding Central Florida locale, and you don’t want to take on all of the necessary tasks like finding tenants, collecting rent, fixing leaky toilets, and answering emergency calls in the middle of the night, you could hand them off to a local, experienced property management team.
Contact CFL Property Management by phone or email, and we will provide you with all of the information you need to open up your schedule, while at the same time enjoying the income and equity benefits of owning real property investments.