Hard money lending is a key part of the financial sector. This type of lending involves asset based lending – loans that are secured through assets instead of being based on credit scores and income alone, in other words. And ask any of the hard money lenders Houston is home to, and each will likely tell you different information about the best way to go about succeeding here. However, understanding a few basics can help you get double digit returns and move your financial situation forwards in a big way.
When you start working towards becoming one of the hard money lenders Houston residents or businesses can turn to, you’ll essentially become an investor. But instead of investing in stocks or bonds, you’ll be investing in the loan that you’re giving. So what can you do to get bigger returns? Here are a few things to keep in mind.
• Be sure to understand the terms of a loan and to craft your terms in a way that is fair, but that rewards you for your risk. Unlike traditional loans, hard money loans are varied in terms and rates, and you can often structure yours in ways that net you solid rewards.
• Don’t make the mistake of taking on a loan that is higher than 65% in the loan to value ratio. This is important since it provides you solid security and margin of safety that means you can rest easy knowing you’re extending a loan that is beneficial to you and to the borrower.
• Seek regular monthly disbursements. This way you’ll have a steady cash flow throughout the loan instead of larger lump sums.
Since a hard money loan is backed by real estate, you’ll be issuing a loan that is going to reward you with security. That tangibility means that things like inflation aren’t as big a risk. You can get the kind of results you deserve from your loan without worry.
Simply put, becoming a hard money lender is something that’s well worth considering. It could net you double digit returns – something many other investments can’t offer. If you’re serious about becoming a hard money lender, be sure to do it the right way. Pay attention to loan structure, collateral, and other key points like those listed above and you should be able to get the right returns from your investment.
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