Hard Money Real Estate Loans Go Way Beyond Fix-and-Flip
Run a quick internet search on hard money and you are bound to find tons of articles discussing funding fix-and-flip projects. No doubt fix-and-flip is one of the forms of property investing that relies heavily on hard money. But hard money real estate loans go way beyond the typical fix-and-flip strategy.
All sorts of real estate assets can be acquired using hard money. For the real estate investor, it is a matter of deciding on a strategy and then looking for appropriate properties. For example, a popular alternative to fix-and-flip is buy-and-hold.
Long- vs. Short-Term Investments
The fix-and-flip and buy-and-hold models could not be more different in terms of primary goals. Fix-and-flip investors are looking at short-term gains. They look to purchase distressed properties, renovate them, and get them back on the market as quickly as possible. The idea is to increase value through renovations. Higher value hopefully turns into a decent return more often than not.
Investors employing the buy-and-hold strategy are looking at a long-term proposition. They look to purchase properties with both current and future value. Each property is acquired with the intention to hold it for at least several years. During the hold term, the investor collects rental payments and builds equity.
Buy-and-hold Property Types
Another significant difference between the two strategies is the types of properties investors look for. Fix-and-flip investors tend to focus primarily on single-family residential homes. Buy-and-hold investors focus more on commercial properties and multi-family residential units.
Here are some typical buy-and-hold property types that hard money lenders can fund:
1. Retail Centers
Retail centers are profit generators as long as there are enough tenants to fill them. From supermarkets to strip malls to restaurants and fitness centers, retail is alive and well across the country. Investors are continually looking for good retail opportunities.
2. Self-Storage Facilities
Self-storage facilities do very well in areas with a lot of high-density housing. High-density housing is usually apartment-based, and apartments tend to seriously lack storage space. Investing in self-storage facilities can be very lucrative thanks to monthly income and considerably low overhead.
3. Industrial Parks
Industrial parks are to commercial real estate what apartment complexes are to residential. They provide a suitable home for industrial buildings capable of commanding substantial rental payments. And industrial buildings tend to be subject to triple-lease models, making the investor’s revenue nearly all profit.
Acquiring Properties With Hard Money
There are many more property types investors can go after. All of them have one thing in common: their acquisitions can be funded with hard money loans. Lenders like Salt Lake City, Utah’s Actium Partners welcome opportunities to help investors fund new acquisitions.
Hard money is attractive because it can be arranged quickly. Speed is important in the property investing space, a space that is highly competitive and rewards those investors capable of moving most quickly. In addition, hard money also offers:
- Flexible and customizable loans
- An asset-based underwriting model
- Minimal paperwork requirements
- Much shorter terms
Hard money lenders are also more willing to look at properties that cause anxiety among traditional lenders. Where a bank might insist that an investment property be stabilized prior to approving a loan, a hard money lender can look beyond stabilization concerns to focus squarely on the property’s current value.
Hard money lenders are known to fund fix-and-flip strategies. But they also fund a broader scope of real estate and business needs. Some, like Actium Partners, focus on commercial real estate transactions. Others will lend for land development, new construction, or just about any other need an investor has.
