Texas Hard Money Lenders are often a last resort for a new investor, one with bad credit or one who simply does not have the liquidity to invest in all cash.
What are Texas Hard Money Lenders?
These lenders are typically individuals as opposed to lending institutions that have extra capital to invest. Instead of investing in traditional investments, they choose to lend their money to others at higher than usual interest rates. Their rates will vary greatly from lender to lender, but can range anywhere from twice the going rate to four times the going rate because their rates are not regulated by the government (except for state usury laws).
Why pursue Texas Hard Money Lenders?
These types of lenders do not always require borrowers to pass credit checks. They base their loans on assets – in this case the real estate you would be purchasing – so those with bad credit could possibly qualify for this type of loan when they might not qualify for a traditional loan. Also, because of the nature of Sheriff Sales, the fact that you do not obtain full title until after the redemption period and because no true inspection can be done on the property until after purchase, Sheriff Sale Properties do not qualify for traditional loans, even if the borrower has excellent credit.
Why would one NOT pursue Texas Hard Money Lenders?
- Expense – Money lenders, because of their terms, are expensive and their fees significantly cut into your bottom line. Many impose penalties for early payment and most charge significant points for using their money.
- Regulation – Because this industry is unregulated, you must be very savvy understanding the terms of this type of loan. These lenders can be a source of financing, but you must be very careful that you understand exactly what the lender is requesting in return.
How to Find Texas Hard Money Lenders?
This type of lender, of course, can be found on the internet, but a better choice is always to get a recommendation from someone you trust. This type of recommendation can be found from a trusted Mortgage company, a Realtor or a Title Company. Ask them who they have worked with successfully before!
If the risk and expense of Hard Money does not appeal to you, and you do not have the cash on hand for investing, there are other options. Many investors begin with very small investments and turn to their credit cards for a cash advance. A “Credit Card Loan” is also a high interest loan, but it is a lot less intimidating than a Hard Money Loan as it is from an institution, and you are likely pre-approved for a cash advance. Another option, and perhaps the best option if this option applies to you, is a family loan. Asking a family member for a short term loan, offering to repay the loan with interest, has been a successful option for many an investor. Remember, once your initial investment is sold, you should be able to pay off the family loan and retain additional capital for future investments. But, remember, investing in Sheriff Sales is risky. There is a lot of unknown! It could be highly successful, but you should always be prepared for a disappointing outcome as well!