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This is a type of short term loan that is considered to be an alternative source of funding usually for commercial real estate.
The hard money industry in the United States started in the late 1950s and today thousands of real estate investors look towards hard money lenders to buy and sell real estate all over the country.
Right from the beginning, hard money industry has not been formally regulated by state or federal laws. However, there are some restrictions on the interest rates that have been imposed by state governments. It is because of this freedom from all laws and regulations that the hard money industry can function with utmost speed, and this makes it attractive to those looking for fast and speedy funding.
There are some real estate programs across the country that allow borrowers to just to borrow money but also to take on commercial properties and develop them. This way, the lending company plays a dual role of supplying the property for commercial development as well as funding the project. The borrower usually uses his resources to develop the property but the money comes from the lender. In other words, the borrower is nothing but a contractor who develops the property for the lender and then disposes it off and repays the lender. Here, the borrower can dispose the commercial property at whatever price he sees fit.
This does not mean that the entire money required to develop the property comes from the hard money loan. In fact, the borrower, based on the agreement and contract with the private lender, also uses part of his money. The major chunk of the money from the private lender is in the form of hard money in addition to the property that has to be either developed or refurbished.
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