Kentucky has recently been a growing place to invest in real estate. It is on a hot streak, and a strengthening economy in the state is giving more attention to the very affordable housing markets in the state. According to Fortune Builders, inventory in Kentucky has been moving very quickly since it’s cheaper to buy real estate in Kentucky than it is to rent.
Growing demand has led to great profit margins for real estate investors. Certain cities, like Louisville and Bowling Green, have been well known for spectacular real estate markets. The median home value of a house in Kentucky has grown considerably in the past several years. With local real estate appreciating, one factor is helping the state continue to grow: the state’s proximity to Illinois.
Many potential homeowners in Illinois have been crossing into Kentucky to buy homes. Why? Because homeownership taxes in Illinois have been through the roof, while Kentucky’s homeownership taxes are drastically more affordable.
With rising home values and demand, hard money loans might be the answer for real estate investing in Kentucky. Hard money loans are also known as last-resort loans. They are frequently used for fix and flips, long-term rentals, construction projects, and repairs for distressed properties.
The biggest advantage of a hard money loan is how quickly it can be approved. The average hard money loan can be approved within a couple of days, while traditional mortgage loans from the bank take a month if not more to be approved, given all the documentation they require. Having a loan that can be approved within a couple days is especially advantageous in a high demand market where you have to put down an offer within a couple of days.
Hard money loans can be approved so much quicker than bank loans because they are based on the property as collateral, not the credit score of the borrower. Most hard money lenders still need minimum credit scores of 600 to 620, so being based on the property means the lender takes on the property in case the borrower defaults on the loan. A lender has to find out whether the property can pay off the hard money loan as a result.
Due to the added risk for the lender, hard money loans have disadvantages too. They have higher interest rates of 8–15%, lower LTV ratios, and shorter repayment periods. This means hard money loans are very expensive and need to be paid off quickly, and they cover a smaller proportion of the down payment than a traditional loan which can be paid off with a less expensive interest rate, in 15 to 30 years instead of one to three years.
Hard money loans thus require a good strategy for investment and being paid off. It’s important to note how important it is to be careful working with hard money lenders. You can’t trust every hard money lender since many add on extra fees, like extra underwriting costs or origination fees. Many might also not be transparent about fees added onto hard money loans while signing.
At Hard Money Lenders IO, we have you covered in your real estate investment in Kentucky and getting your foot in the door in the Kentucky market. Here are the best hard money lenders in Kentucky.
