Real Estate Investment is now grown better than ever. Imagine getting the property for less than half of its worth. The problem is getting cash to cover the property. That's why investors have and will always rely on private finances to acquire real estate deals done.
A hard money loan is a loan based on the value of repairs after the property. Loans are not based on the actual credit-worthiness of the borrower. If the deal is good enough, you could potentially get a deal done in real estate by taking no money out of your pocket.
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When you are working with short sales or bank-owned properties, you must show proof of funds letter. Proof of funds demonstrates your ability to actually close on the property if the bank agrees to the price. Hard money lenders are able to provide you a proof of funds letter to allow you to get negotiated deals.
Current prices are not the lowest available fare for the purchase of the real estate property. A typical hard money lender will require you to pay 5 points upfront and repay money borrowed at a rate of 15%. The 5 points mean you pay 5% of total loans at the time you borrow money.
The lack of available credit for real estate in the current credit crunch makes borrowing hard money even more sense. The lenders will also allow you to borrow money for repairs in many cases.