What Is an Investment Loan? A Guide for New Real Estate Investors

Did you find an excellent real estate investment opportunity but lack sufficient funds to finance it? It would be a shame to miss that chance because the property promises a handsome profit. That is why you should consider getting an investment loan.

You can choose between traditional and fast hard money loans. Here is what you need to know about both types and how to pick the best option for the upcoming project.

What Is an Investment Loan?

An investment loan can be any loan focused on investing in a property. You can acquire it to purchase a property that you plan to hold in your ownership in the long run. However, the more common types of investment loans involve those focused on flipping properties and earning money in the process.

Here are the three loan types available to real estate investors:

  • Traditional
  • Home equity loans
  • Fast hard money loans

Traditional and Home Equity Loans

The first option most investors think of is to head to the bank to borrow some money. However, you often find that this method is tedious and often takes months.

Here is how the process works with most banks:

  1. You head to the financial institution and submit a loan application. It is necessary to prepare significant documentation, which takes effort. Additionally, the bank might ask for an application, inspection, appraisal, and other fees.
  2. The bank will analyze your credit score, income, and other financial factors. Even a single flaw in your credit history can significantly affect the amount of money you can get.
  3. You must be patient until the institution decides on the loan size and terms. That can often take weeks or months.

Home equity loans include borrowing funds against a property you already own. Think of it similar to a mortgage — you receive the money right away and pay it off in monthly installments.

Why Fast Commercial Hard Money Loans Are a Better Option?

You found the perfect property to invest in, and nobod’s willing to wait for months until you secure the funding. Another investor might swoop in and take your profit. That is where fast commercial hard money loans come into play because it takes only days to receive the funds.

Hard money loans are secured from private sources (usually an investor pool), which means you don’t have to deal with banks and financial institutions. Instead, you establish direct contact with the lenders that establish the grounds for loan approval. They will estimate your real estate assets, and you might need to offer some collateral.

Here are the benefits of hard money loans over traditional methods:

  • Get the money fast— it takes only days to finalize the process.
  • Minimal hassle — you only need minimal documentation.
  • Don’t worry about credit scores — instead, your assets serve as grounds for loan approval.

It’s usual for hard money loans to be short-term, which means no longer than 6-12 months. However, if you make a different agreement with the lenders, the period might vary.

Who Should Get a Hard Money Loan?

Check out some situations when a hard money loan would be a great solution:

  • It is imperative to get a loan quickly, and you can’t wait for the bank to decide on whether they will approve it.
  • Your credit rating isn’t impressive, and there is no other choice but to look for alternatives.
  • You need cash to bridge a period between transactions.
  • You are a beginner investor willing to take on real estate investment but aware that they need additional funds for the first project.

Flexibility is essential to you, and you want to agree on a repayment schedule that suits your requirements.

There is no need to wary of investment loans. Fast commercial hard money loans are great for both beginners and experienced investors who lack cash and need it quickly. Professionals can even help you to identify properties worth investing in to improve the odds of profiting on the project!