Even 8 years after the housing market crash that caused a global recession, a savvy investor can find great real estate deals in just about any market in the United States. With so many opportunities to profit from real estate, the only limiting factor is access to the capital you need to continue purchasing properties.
Before the recession, banks were giving out mortgages like it was candy, but lending standards have tightened up considerably, making it difficult to get the money you need to purchase multiple properties or tap into existing equity.
There are several ways that hard money loans allow you to leverage an existing property to free up cash for a new investment.
First, by using short term hard money loans to finance a construction project, you get a higher return on investment for the cash you invested than you would get if the project was done with cash. How does this work?
Imagine the following scenario. You purchase a $100,000 property, spend $40,000 rehabilitating the property, and sell it for $180,000, all in cash, for a profit of $40,000. That’s a 28.6% ROI.
Let’s say that instead of doing the entire project in cash, you financed the project with a hard money loan of $80,000 at 10% interest and a 3% origination fee. The cost of your loan for a 6 month project would be $6,400. Assuming that the purchase price, rehabilitation cost, and selling price are all the same. Your profit would be $33,600 on an initial cash investment of $60,000, an ROI of 56%.
By using hard money loans, you can spread out the cash you have into multiple projects generating higher ROI rather than putting all your cash into a single project.
Second, you can use hard money cash out refinances on existing properties to finance new projects. NLDS Corp. offers cash out refinancing at 50-65% LTV for 1-2 year terms. If you have existing properties that are generating profitable rental income, you can use cash out refinancing to free up cash for new real estate projects.
If you have property that you want to leverage to finance new real estate projects, NLDS Corp. wants to hear your proposal.