Louisville is the biggest city in Kentucky by far. It is a big city and also the 29th biggest city in the country. It is also home to the University of Louisville, a powerhouse in collegiate sports as well as one of the best universities in Louisville. It is also known for being home to the Kentucky Derby.
Nicknamed the “Gateway to the South” and “Bourbon City,” Louisville is a soaring real estate market as well as a terrific location. Jeff Rohde at Roofstock says the biggest industries in the city are manufacturing and transportation. As one of the fastest growing cities in the state, Louisville is also known for its terrific cost of living and affordability, like the rest of the state.
As a renters’ market, after people are putting the house on the market to rent, it’s usually gone within a week or two weeks. Right now, Louisville is a buyer’s market, which means supply of homes is vastly greater than supply. In a buyer’s market, an investor wants to get the property in shape so the property stands out from the rest of the field. Buyers need to be interested in an attractive home, particularly in a buyer’s market.
To fund repairs for distressed or foreclosed homes in Louisville, hard money loans are the answer. They’re otherwise known as bridge loans or last resort loans, but they are mainly used for repairs of distressed properties.
The biggest advantage of hard money loans is their fast speed of approval, but in a buyer’s market like Louisville, the speed of approval might not be the biggest advantage. Instead, hard money loans might count as cash within the Louisville market for cash only, distressed properties. This will make real estate investors using hard money loans more attractive investors for distressed properties, since only a limited pool of investors can qualify for cash only properties, and traditional financing is often out of the question.
For cash only properties with significant potential, hard money loans can count as cash, which makes them very advantageous in the Louisville market. Hard money loans can be approved much quicker than traditional mortgage loans. They can be approved within a couple of days, as opposed to traditional mortgage loans, which take a month or more to be approved.
This is because hard money loans don’t depend on the credit of the borrower (although most hard money lenders require minimum credit scores of 600 to 620). Instead, they depend on the property as collateral, particularly the projected after-repair value of the property. If the borrower defaults on a hard money loan, the lender takes on the property, which is a big risk because the lender has to see whether the property can pay off a hard money loan.
This also means hard money loans come with significant cons and disadvantages. They have lower LTV ratios than traditional loans, which means they require larger down payments than traditional loans. They also have interest rates of 8–15% which are very high compared to traditional financing, and they have very short repayment periods, usually of a year or a couple of years, which is very short compared to the 15 or 30 year mortgages of traditional financing.
Hard money loans can also be very risky due to their looser and less regulated nature than bank financing. It’s important to only trust the most trustworthy or reputable lenders.
At Hard Money Lenders IO, we have made a research-backed list of the best hard money lenders in Louisville, so you don’t have to.