South Dakota might not seem like the best market to invest in real estate, but according to Ben Mizes at List With Clever, South Dakota has recently had rising property values and the growth has been consistent in recent years. It is a very hot state for real estate investors and is known for low taxes, low home prices, and very high returns. Investors from out of the state are pouring a lot of money into the state.
There are a lot of places you can invest in real estate in in South Dakota, including. Sioux Falls, Spearfish, Madison, Rapid City, Brandon, and Aberdeen. The increased demand for real estate in the state has led to rising home values, and investors are seeing significant returns. The state has one of the best wage increases in the state. The appreciation rate of the state is very high at the moment.
Right now, South Dakota is a seller’s market. However, this might change soon since the pandemic created a surge in housing demands. This means prices are high and homes are selling fast. Demand is outpacing supply in South Dakota. Real estate investors might get into bidding wars to invest in real estate in the state.
Hard money loans might be the best way to invest in real estate in South Dakota. Hard money loans are otherwise known as last resort loans or short-term bridge loans. Their biggest advantage in a seller’s market like South Dakota is their fast speed of approval. Hard money loans can be approved within a few days, while traditional mortgage loans take more or less a month to be approved.
Their reputation is that they’re used for real estate transactions like fix and flips and long-term rentals. Hard money loans can be approved so quickly because they’re based on the after repair value of their property for their terms and rates. This is very different from traditional mortgage loans, which base their terms and rates on the financial standing and credit score of the applicant. Hard money loans use the property as collateral (despite requiring minimum credit scores of 600 to 620). If a borrower defaults on a hard money loan, the lender takes on the property, instead of the lengthy and expensive process of a foreclosure often associated with mortgages.
This means hard money loans are inherently risky, and this is reflected in their terms and rates. Hard money loans have higher interest rates (8–15%) than traditional mortgage loans, which have interest rates of just over 4% on average. They also have shorter repayment periods of more or less a year, which is significantly shorter than traditional mortgage loans (which have repayment periods of 15 to 30 years). Lastly, hard money loans have lower LTV ratios, which means real estate investors need to put down higher down payments than traditional financing.
However, not every hard money lender is trustworthy. Some hard money lenders don’t communicate well about fees like origination fees, closing costs, and underwriting fees. Also, many hard money lenders don’t lend to new investors since they require a successful track record of successful fix and flips, which means new investors are particularly susceptible to bad hard money loans.
At Hard Money Lenders IO, we have you covered in finding the best hard money lenders in South Dakota. Look no further for the best hard money lenders in South Dakota.