Hard Money Lending versus Real Estate Crowdfunding

Funding real estate projects are becoming easier and more diversified. The power of the internet has given rise to real estate crowdfunding and hard money lending. Both of these forms of funding have their own merits making each suitable based on financial needs of borrowers.

Hard Money Lending

Hard money lending entails a company providing hard money loans for real estate by using the borrower’s real estate as collateral for the loan. Getting a hard money loan for real estate is naturally very fast because it doesn’t come with the condition strategy that is common with the traditional bank loans. Instead, hard money lenders emphasize on the value of the collateral, the interest rate and the advance rate of the hard money loans for real estate. The rate that is based on the collateral value is the one referred to as the advance rate. The interest rate of the commercial hard money loans for real estate begins at 10% and the rise to the mid-teens. The maximum hard money loans for real estate development or purchase that commercial hard money lenders can offer you is 70% of your home’s value. One of the advantages of hard money lending is that the hard money loans for real estate development are not affected by a bad credit history that you may have. This means that anyone who needs hard money loans for real estate, regardless of their bad credit history, can secure hard money loans for real estate and keep their businesses from falling during tough times. To complete the borrowing process, you are required to provide information on the collateral, for example, the address of the property, the renovation budget and the price of purchase with other relevant information. Commercial hard money lenders vary from one another. It is, therefore, important that you choose the one that operates in your locality because many of them are licensed to work in specific regions.

Real estate crowdfunding

This involves asking for funds from qualified stockholders via the internet for several projects, for example, rehabilitation and construction of real estates. The accredited investors are well connected and have dedicated grip on the real residential and commercial property value. Although the strategy for a single crowdfunding campaign is different, the overall notion is still the same. Once the fund is raised, the borrowers can use the capital to complete their rehabilitation process or use the money to build real estate. The money that the borrower takes can be secured or unsecured. The borrower’s property can be used as collateral for the loan. Getting lenders through crowdfunding is the common and useful way to make financial problems disappear. However, there is an integral risk for the moneylenders if the borrower fails to follow through with their project plans. Crowdfunding and all its applications evolve as the internet is too. Crowdfunding can help inventors raise money quickly and successfully because they have a large research. On the other hand, hard money loans for real estate boost a borrower’s cash flow fast by using the real estate as the collateral for hard money loans for real estate. Both real estate crowdfunding and hard money lending can be used to achieve financial purposes and make money.