What is Hard Money?
Hard money is asset-based financing that is secured by the value of the property being bought. The loans are short-term, normally around 12 months and sometimes for up to five years. Hard money loans are provided by private lenders or companies who are often investors themselves. Sometimes, they’re offered by a group of individuals who’ve pooled their money to lend on business-related transactions, such as real estate renovation and construction.
The qualifying criteria for a borrower can vary from lender to lender, but credit scores, payment history, tax returns, and employment status are rarely scrutinized. Instead, hard money lenders consider the real estate property being collateralized as the primary factor in determining loan approval, amount, and terms. As a result, authorizations can happen within a matter of days and, frequently, so can closings.
If you’re fairly new to real estate investing, however, it’s never a bad idea to have a real estate investor credibility kit on hand should you be asked for it. This package provides a nice overview of your real estate investing knowledge and successes. As such, it generally includes a list of properties from your portfolio and a business statement. It might even include before-and-after pictures and escrow closing statements. You may never need it, but it could improve your chances for approval if you have it.