In this video, hard money lender and real estate investor Beau Eckstein talks about getting hard money loans for speculative construction loans.
These loans are best for small real estate investors who need capital for doing construction real estate projects. Often, these are house flips, where the real estate investor buys a property, renovates it, and then sells it quick for a fast profit.
These loans are considered speculative by conventional mortgage lenders because there is higher risk in the loans. There are many reasons for this:
The renovation cost more than anticipated.
The renovation took longer to complete than initially planned.
It took longer to sell than expected.
The market turned and now the real estate isn’t worth as much as planned.
Those are the main reasons that these loans are riskier than a standard mortgage. So lenders want more in return (higher rates, more points, sometimes a piece of the profit).
Conventional real estate lenders like banks have almost zero appetite for these types of spec loans. However, these loans are the bread and butter for hard money, or private money, lenders.
If you want to learn more about hard money spec loans, check out Beau Eckstein’s site and give him a call.
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