Hard money loans are among the most popular types of loans for real estate investors. When they want to finance new property acquisitions, they turn to hard money because it is fast, efficient, and more easily obtained than conventional loans. Fair enough. But what do investors actually buy with the loans they manage to secure?
Hard money can be used to purchase virtually any kind of property. It really depends on the lender’s willingness. Take Actium Partners in Salt Lake City, UT. Most of their loans go for commercial properties. They don’t do any fix and flip projects, construction loans, etc. But there are other hard money lenders who do take on those types of projects.
Here are some of the more common types of properties Actium says investors buying with hard money loans:
Office Buildings and Complexes
Office buildings and complexes have long been popular among real estate investors because of their high value. Not only are the properties themselves worth a lot, but they can generate significant rental income over long periods of time.
Things have changed slightly in the office space market since COVID. In markets like New York City and San Francisco, office space is not in such high demand these days. But in other parts of the country, demand remains robust. That means investors are still interested in obtaining these properties.
Retail is another attractive sector to real estate investors. Strip malls and standalone retail outlets can be very valuable from a rental perspective. Investors seem especially interested in arrangements that have the renter cover everything: rent, utilities, and taxes. Such arrangements usually require that the renter maintain the property as well.
Some real estate investors prefer to put their money into medical facilities. They invest in medical office buildings, clinical space, medical labs, and the like. They tend to shy away from hospitals and standalone emergency departments, though. Those are usually the domain of larger hospital groups themselves.
A major advantage of investing in medical space is the simple fact that healthcare needs will never go away. As long as people roam the Earth, they are going to need healthcare. That means there will always be opportunities to acquire and rent medical facilities. Real estate investors appreciate that.
Speaking of industries that are not ever going away, multi-family housing is yet another one. People will always need a place to live. Furthermore, there will always be that segment of the population that either chooses not to buy or simply cannot afford to do so. They are content to continue renting.
Multi-family housing is centered mostly on apartment buildings and complexes. But in urban environments, there is often the possibility of purchasing large houses built a century ago and converting them into multiple apartments. They are pretty attractive to investors looking to maximize their return on a per square foot basis.
Vacation properties are considered commercial properties when they are not occupied by their owners. As such, it is normal for real estate investors to build exceptionally large portfolios of vacation properties in popular destinations. They are great candidates for hard money loans whenever they are looking to add to their portfolios. A hard money loan facilitates fast acquisition and can generally be repaid just through rental income alone.
Most hard money loans go to cover real estate transactions. Lenders are eager to invest in such projects because the returns are so high. Likewise, hard money gives investors access to fast financing without having to deal with banks. It is a win-win situation all the way around.