Why do private investors provide hard money loans?
For private lenders, the real estate market provides an investment opportunity that is more secure than the stock market yet offers higher rates of return than fixed rate investments such as savings or CDs with banks. While there is some perceived risk in lending to hard money borrowers, that risk is minimized by the fact that these loans are secured by a property’s equity and that loan-to-value ratios are kept low. If a borrower defaults on his/her loan and the property is foreclosed on, the lenders recoup their investment through the sale of the property, or they become the owners of the property. All loans are secured by personal residences or apartment houses as collateral for the loan.
