Many investors use hard money loans for short term needs, such as acquiring real estate. Typically, hard money loans have a duration of one month to five years, which is significantly shorter than traditional mortgages that can span ten to thirty years. However, traditional mortgages can be difficult to obtain for distressed or vacant properties, prompting investors to turn to hard money lenders.
Let’s consider a hypothetical scenario: An investor discovers a vacant or dilapidated apartment complex that interests them. Since obtaining a traditional mortgage is challenging, the investor has the option of borrowing from a personal contact or securing a hard money loan to purchase the property. The hard money loan can also cover the expenses associated with the necessary repairs for the apartment complex. Once the repairs are complete and the complex is ready to rent, the investor can apply for a traditional mortgage and use the funds to repay the hard money loan.