Hard money loan are loan that is given by private investors. Hard money loan providers can be from anywhere but the lenders or borrower to work within their own state, i.e. if you are looking for a loan in Los Angeles then you need to find an investor in Los Angeles.
Construction loan: Under construction loan, the hard money lender offers the the borrower the money in stages. For Eg: If you have a land in Los Angeles and want to build a house on it, then you need to get a approval from the city of Los Angeles to your construction plans. Once your plans are approved you can now contact the hard money lender, providing him the complete information about the construction including construction budget. After the lender agrees to loan you, the hard money lender will loan you the money is by stages. The stages are:
- Contractor finishes the foundation, the contractor will get paid after inspection.
- when your electrician finishes the electricity in the house, then the electrician will get paid after inspection.
You understand the concept? All contractors will get paid by the hard money lender by the completion of the construction. The reason behind the hard money lender do that, because he want’s to have control of the money. Private investors know the risks they’re taking but they’re still willing to take these risks only if they have 100 percent control of the money.