Are you investing in Omaha? Then this is for you: here are 4 reasons to consider using a hard money lender. to grow your portfolio more quickly.
The first problem real estate investors face is raising enough capital to get started. Almost immediately, they face the second problem, not enough capital for a second deal because all your capital is tied up in the first. In this piece, we discuss a topic most investors can relate to. How to continue growing your portfolio when your capital is all tied up? Along the same lines, how do you deal with unexpected expenses?
Ultimately, you’ll need to wait to raise funds, or leverage other people’s money. There are a couple options to consider, like bank commercial lending and private money lending. We’ve covered those in other articles, so here we will address 4 reasons to should consider using a hard money lender…
4 Reasons To Consider A Hard Money Lender
1. Conserve Your Own Capital
The first reason, which I already referenced, is that You’ll be hard-pressed to run and grow your business when all your capital is tied up in one investment. Keeping your capital free gives you more flexibility. That keeps your capital available for other projects. This is perfect for an investor looking to grow their portfolio.
2. Leverage to Grow
Any type of leverage allows you to use a smaller portion of your capital along with someone else’s money. Instead of funding one investment on your own, you might be able to do 5-10 deals with the same capital. Another approach is to pursue a much bigger deal, perhaps 5-10 times larger, while only needing a small part of the project cost. There are times when fully funding with your own capital may make sense, but you can grow far faster with leverage.
3. Professionalism and Experience
Hard money lenders are business professionals who put their money to work in exchange for a tidy return. They will require due diligence before they trust you and your project with their assets, just like a banker would.
But they are different from private money lenders and friend/family investors who will worry about their money for the duration of the project. Typically, these investors will require a little extra hand-holding to get them through sleepless nights. You might even have a midnight call where they ask for their money back for some other project. Professional lenders may cost a little more, but they will greatly reduce your stress levels.
4. Fast Access to Funds
Hard money lenders can deliver funds quickly, whether to fund a new project or make repairs. Sure, you could use your own capital to repair the broken A/C system, if you’ve saved up enough. But waiting to make repairs or fund a new deal can take a long time. As they say, that time costs money, in the form of delayed revenue generation on your deal. Hard money allows you to eliminate the delay and generate a return on your deal sooner.
Does Hard Money Make Sense for Me?
Real estate investing requires capital. You need capital to run the business, acquire properties, make repairs, and many other things. Most people need extra capital and are reluctant to tie up all their money in a deal. Even if you have adequate capital, could you do more deals or a much larger deal? Hopefully reading our four reasons to consider using a hard money lender will help you make the right choice for your business.