Lafayette is known as the county seat of Tippecanoe County, Indiana, and is also known as the “Star City.” It is named after famous French General Marquis de Lafayette and has a population of just over 70,000 people. Lafayette has a suburban feel where most residents rent their homes and is a source of much green space. A lot of young professionals tend to live in Lafayette due to the university scene.
According to Niche, Lafayette has a median home value of $114,800 and a median rent of $817. It also has a dense suburban feel, and is known as a college town because it is home to Purdue University, one of the biggest universities in the country and a sports powerhouse. Home to many college students and academics, Lafayette is much more than just a college town.
Lafayette is a seller’s market. That means demand is outpacing supply in Lafayette. It means homes are selling fast and higher than the listing price. In Lafayette, like other seller’s markets, it’s easy to get into bidding wars for properties due to the nature of the housing market.
Hard money loans might be the best way to invest in real estate in Lafayette. Hard money loans are also known as short-term bridge loans. Their biggest advantage in a seller’s market is their fast speed of approval. Hard money loans can be approved in a couple of days, which is incredibly advantageous in a seller’s market, whereas traditional mortgage loans can take a month at least to be approved. Hard money loans are also more flexible than traditional mortgage loans.
The reason hard money loans can be approved so quickly is because they’re based on the property and the after repair value of the property, rather than the credit score of the borrower. To be clear, credit still matters. Most hard money lenders have minimum credit score requirements of 600 to 620.
However, hard money loans use the property as an asset, and their rates and terms are based on the after repair value of the property. If a borrower defaults on a mortgage, the bank engaged in lengthy and costly foreclosure. However, if a borrower defaults on a hard money loan, the lender takes on the property, which could result in significant profit, but also significant risk.
Hard money loans have risks of higher interest rates, lower LTV ratios, and shorter repayment periods than traditional loans. Hard money loans have interest rates of 8–15%, which are significantly higher than mortgages. They also have repayment periods of more or less than a year, and LTV ratios of 70–80%, which makes hard money loans require bigger buy in in terms of down payment.
However, it’s important not to trust any hard money lender. The majority of hard money lenders will have extra fees, but not every lender is a good communicator about these fees, like origination fees, closing costs, and underwriting fees. Others may tack on extra fees. It is especially difficult for new investors to get hard money loans because most hard money lenders require a successful track record of investments, and new investors are also vulnerable to scams.
Hard Money Lenders IO has made a list of the best hard money lenders in Lafayette. These are the best financing partners for your real estate investment.