For giving repair property loans, hard money lenders are generously compensated. Hard money loans are used by most people who adore real estate and want to repair up or restore run-down properties. The hard money loan industry brings together investors eager to make a high rate of return on their money and rehab clients.
Hard money lenders only offer short-term loans, usually ranging from six to twenty-four months. When they do long-term, they are usually set up as interest-only payment loans amortized over 30 years. To repay the principal, the borrower makes a balloon payment at the end of the loan. The loans typically cover 60 to 80 percent of the property’s value after repairs (ARV). The interest rates for hard money loans are hefty, as are the loan origination points and lender costs.
- Choosing a Business Structure: Choose a business structure, such as a C corporation or a limited liability company, to begin setting up your company.
- Income from Interest Rates: Hard money loans have interest rates ranging from 8% to 18%. The interest rate is determined by the loan amount, the ARV of the property, and the borrower’s credit score.
- Points Income: Points are fees the borrower pays to the lender and/or broker to complete the loan. The number of points awarded is determined mainly by the loan amount and the borrower’s credit history.
- Other Loan Expenses and Fees: As a hard money lender, you profit from additional loan costs and fees, such as document preparation fees, which can range from a few hundred dollars to several thousand dollars. Over the actual cost amount, fees levied for document courier services, property inspections, and in-house notary services are further sources of hard money loan income.
To know more about how you can make money from a hard money loan, click here to read on.
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