You may be wondering if a hard money loan can be used to help fund the purchase of a residential rental property. The answer is: Yes, hard money loans may be used in the context of obtaining a rental property, as opposed to a fix-and-flip property. This article will provide further context and details in how you can use a hard money loan in Los Angeles to purchase residential rental properties.
What is a Residential Hard Money Loan?
A residential hard money loan is essentially a non-bank loan that you may apply for and, if approved, use the funds to purchase an investment residential property. When it comes to hard money loans for rental properties, the property itself serves as the collateral.This is generally why the closing time for this type of hard money loan is much faster than others. In many instances, once approved, you can close on a hard money loan within 3 to 13 days, depending on your particular circumstances.
Below are examples of situations where a residential hard money loan could be considered a good option to help fund the real estate investment:
- Low credit score – unlike most traditional lenders, hard money lenders in Los Angeles are more concerned with the rental property’s value as opposed to your financial history.
- Foreclosure avoidance – You may be able to use a hard money loan with your property as collateral to avoid losing the property via foreclosure.
- When you need quick cash on your residential investment property.
- If you are looking for complex loans with multiple collaterals
Hard Money Loan vs Mortgage
In many instances, purchasing a rental property can wind up being a great investment. Hence, some real estate investors first turn to traditional banks for financing. However, a mortgage from a traditional financial institution may not work for everyone, especially if time is of the essence and/or you need to get a loan based primarily on the value of the property itself and not your past financial history. Thus, many people opt to work with hard money lenders in Los Angeles such as PB Financial Group, and utilize a hard money loan to purchase an investment property.
When it comes to hard money loans, the qualification requirements are typically less invasive when compared to a traditional bank or credit union. In addition, the processing time for a hard money loan is generally much quicker. In fact, it can take as little as two weeks to secure a hard money loan, whereas a traditional loan could take months before you are approved for funding.
Another important distinction between a mortgage and a hard money loan is the down payment. When you apply for a mortgage, most banks will require you to put down at least 20 percent of the property’s value to qualify for the mortgage.If you do not put down 20 percent, you will probably need to purchase private mortgage insurance. In contrast, with a hard money loan for residential properties, you receive the full amount without having to put down a significant sum.
Have Questions about Funding Your Next Real Estate Project? Contact PB Financial Today!
If you are looking to secure non-traditional financing for your real estate project, contact the highly reputable and experienced hard money lenders at PB Financial Group. PB Financial Group is a premier direct hard money, private money, and bridge lender, who has been providing quick funding since 2006 and have funded over 2700 hard money/private money loans.Our objective is to work to satisfy your financing needs on important real estate projects throughout California in an efficient and effective manner.
PB Financial NMLS #357614/DRE #01522495