How familiar are you with the ins and outs of modern commercial property investing? If you’re still struggling with the difference between hard money loans for real estate investors and general loans, you may want to keep reading. The real estate market is a dynamic and ever-changing one, an industry that requires its investors to regularly stay on top of the most recent trends in order to provide customers the resources they need to achieve their goals.
What Is A Hard Money Loan?
Let’s start off with the most commonly asked question involving commercial property investing. Hard money offers higher interest rates as well as lower loan to value ratios — these hard money interest rates can start as high as 15% to 18%, with some cases even exceeding 20%. The vast majority of hard money loans are secured by a property with an equity of anywhere from 30% to 50%, insuring the investor is well-protected throughout the process.
What About Private Loans?
Despite the benefits of a hard money loan, some still prefer to go the private route. The duration (or payment period) for a private loan is significantly shorter compared to their traditional counterparts — the latter can go anywhere from one year to 20 years, whereas private loans don’t exceed five years. Since the majority of people will buy their home with either a 15-year or 30-year mortgage (with home prices still increasing over time), the amount of home equity individuals or families have increases as they age.
What Are Common Concerns Homeowners Share?
Commercial property investing agents need to be well-versed in the concerns of homeowners and homeowners-to-be. Studies have shown nearly 60% of homeowners wishing they better understood the terms and details of their mortgage, with additional concerns including the proper type of loan, financing rates and the availability of their long-term saving options. A typical bank loan borrower that wishes to apply for a business loan needs to have been in the business for at least two years, with an annual revenue of $250,000 and in good credit standing.
How Common Are First-Time Buyers?
Although many homeowners have experience searching for and buying a home, the commercial property investing industry sees many new faces in the day-to-day. Recent studies have shown 32% of people looking for new homes are first-time home buyers. The median amount of home equity for people under the age of 35 is around $20,000. Hard money deals, even now, are often sought after for their quick turnaround quality (anywhere from seven to 14 days) and secure nature for the investor in question.
What Should I Know For The Future?
It’s essential to stay aware of changing demographics, budgets and, by extension, demand. The year 2011 the population growth in American urban areas began to outpace the suburbs for the first time in nearly 100 years — a few years later the industry would see nearly 328,000 home repossessions across the country. Investment property mortgage lenders are at their best when they can properly address and assist future homeowners with the secured short term loans, renovation lending and commercial real estate they require. Keep this in mind when heading into commercial property investing and reap the benefits as the years go on.