If you take a survey of 100 people in the general public, most would not know how investing in this type of loan programs was. In fact, they may have never even heard of this type of loan before your conversation. A few might consider it to be a loan from a so-called loan shark but that would not be an accurate description either. A hard money loan is a loan made by a reputable company or group of investors for the purchase of land, commercial or residential real estate or to finance the construction of a building. Generally, the risk to the lenders or investors is higher and, in turn, the points and interest rate are higher.

The length of the loan is usually less than three to five years, with no pre-payment penalty.

These loans work great for investors because they understand the ease and convenience of them compared to a standard bank loan. They understand that the higher interest rates, points and closing costs are all part of doing business. In fact, they roll these costs into their planned expenses when analyzing the expected profit from a deal. However, the main benefit is the speed at which a loan of this type can be turned around. Generally, a straight-forward deal can close in less than a week, some of these lenders even promise 48 hours. In fact, investing in these money loan programs themselves may be another alternative for real estate investors willing to think outside the box.

In fact, those that are investing in these programs can expect to see a healthy 12% return on their money, which is beyond the expectations of any savings account. Each investor is scrutinized and each deal is researched, especially in this economy, to try to minimize failure and guarantee success. Most programs are set up to include money from several investors in each deal to minimize the risk even further or investors can pick and choose from deals that they are interested in participating in.

Anyone interested in investing in real estate but unsure of how or where to start should research investing in these loan programs. They offer a great return on an investment and help out fellow investors, businessmen and builders in the process. Hard money lenders are always happy to add someone to their team of investors with deep pockets and are willing to share the profits of this lucrative field.