Georgetown is the sixth biggest city in Kentucky. It is a suburb that has a lot of parks, and it is a place where public schools are above average. Georgetown is home to many young families and young professionals, and it gives a suburban feel where most people in town own their homes. The median household income is $65,812, which is slightly above the national average.
Right now, Georgetown is a balanced market. It is not a buyer or seller’s market. Houses in Georgetown are selling at approximately the asking price.
Hard money loans might be the best way to invest in real estate in Georgetown. They are mostly used for fix and flips, long-term rentals, and repairs for construction projects. Hard money loans use the property as collateral and the basis for the terms of the loan, which gives their biggest advantage — they can be approved faster than traditional loans. Hard money loans can be approved within a couple of days, as opposed to traditional loans which can take a month or more to be approved.
Traditional loans require significantly more documentation than hard money loans. They are based on the credit score of the borrower as opposed to the property, and hard money loans have the significant advantage of not being based on the credit score of the borrower. This does not mean credit does not matter, since most hard money loans still require a minimum credit score of 600 to 620. Overall, hard money loans are not dependent on the financial position of an applicant, which leads to fast speeds of approval.
The speed of approval is a particularly advantageous part of hard money loans because time is money in real estate investing. For competitive and high-demand properties, it’s particularly necessary to put down an offer quickly, especially in a seller’s market.
However, being based on the property means if a borrower defaults, the hard money lender takes ownership of the home, which is different from defaulting on a mortgage, which leads to lengthy and expensive foreclosure proceedings. A hard money lender needs to see whether a hard money loan can pay off the home, which makes it inherently riskier than a traditional loan.
These risks include a lower LTV ratio, a higher interest rate, and a shorter repayment period than traditional loans. A lower LTV ratio for hard money loans, relative to traditional loans, means hard money loans have higher down payments relative to traditional loans. Hard money loans also usually need to be repaid within a year to three years, while traditional mortgages are usually 15 to 30-year loans. Interest rates for hard money loans also range anywhere from 8–15%.
This makes hard money loans mostly used for real estate transactions and property flippers who want to renovate homes. And if an investment using a hard money loan does not pay off, it can be incredibly difficult to pay off a hard money loan because of its unforgiving interest rates and terms.
It’s especially important to be cautious when seeking out hard money lenders. Not every hard money lender is trustworthy, since some might seek out extra fees like underwriting costs, origination fees and closing costs. Although every hard money lender has extra fees, not every lender is transparent or offers the best rates to investors. New investors, in particular, have to be careful because they have such a limited pool of lenders to choose from — the vast majority of hard money lenders require a history of successful investments.
At Hard Money Lenders IO, we have you covered in finding the best hard money lenders in Georgetown.