The average American has about $38,000 in debt, excluding mortgages. It is no surprise that more than a third of the population has bad credit ratings. Hard money lending provides easy access to cash for real estate investors to grow their portfolios, their credit scores notwithstanding.
A traditional mortgage loan is often pegged with a lot of contingencies and red tape, dragging out the approval process. Hard money loans have less stringent approvals with faster turnaround times. However, you may need to have an exit plan in place before approaching the private lending company.
A hard money loan is often a short-term measure, with borrowers needing to repay it within one to three years. They also attract high interest rates of approximately 7.5% to 12.5%. Due to the nature of the risk involved, your lender requires a detailed exit plan on how you expect to pay back the principal plus interest accrued. Here are six strategies that you may propose.
1. Traditional Mortgage Loans
Hard money lenders in Atlanta may act as a stop-gap for your cash flow to prevent you from losing out on a prime property deal. You can enjoy flexible loan requirements and faster approval. You can utilize the two to three-year hard money loan spell to sort out issues that bar you from accessing traditional mortgage loans. Refinancing with a mortgage loan can help you enjoy lower interest rates and a longer repayment plan.
2. Self-Amortization
You can structure the loan to pay off the loan by the time it matures through regular payments. Rental income from the property that you purchase can help you achieve this. You can clear the principal and interest by the maturity date.
3. Selling of the Property
Most real estate investors utilize hard money lenders in GA for fix and flip loans. You can use the funds to purchase distressed properties, refurbish them and later sell them at a profit. You can utilize the proceeds from the sale to repay the loan. You may require sound investment skills and proper planning to ensure that you retain a profit after the sale.
4. Subprime Loans
You may need to repay the hard money lender when your loan matures or risk losing the property. If low credit scores or other factors prevent you from accessing traditional mortgage loans, you can turn towards subprime loans. You may end up with higher interest rates than in conventional lending, but a slightly favorable than your hard money loan.
5. Another Hard Money Loan
If you exhaust all your options, you can pick up another hard money loan. However, this measure may be too expensive. You can opt to use the same hard money mortgage lender or opt for a new private lending company with more favorable loan terms.
6. Blending
You can opt to combine two or more strategies above to attain your goal. For example, subprime loans can help you offset the burden before you complete the sale of the property and pay it off eventually. You can work with the lender to identify a perfect, blended exit plan.
Hard money lending is short-term in nature, and you may need to have an exit plan in place before approaching a private lender. For more information on exit planning for your hard money loan in Atlanta, GA, reach out to Realty Resources Corporation.