Are Low Interest Hard Loans All You Need?

Added: (Sat Nov 19 2011)

Pressbox (Press Release) - There's a common misconception among new real estate investors and hard loans. Discover how you could very well be approaching investing in real estate from the completely wrong angle.

I decided today that I wanted to try a little experiment. You see, I get tons of questions that come in each and every day. So many that it's impossible for me and my team to keep up with them all!

So in an effort to clarify the most common questions, I am going to do a weekly post here on my blog that addresses a point that comes up frequently.

In this first installment we are going to tackle hard loans.

This is really going to be more for the newbies who are thinking about getting into real estate or have just done so recently.

Here's a question that came in the other day: What percentage interest do you charge, on average, for lending?

That got me thinking... do people believe that in order to be successful, all they need are low interest hard loans?

Here's the thing about loans hard money. They are for a short term so the interest rate isn't the most important factor. Think about it - when you get a 30 year mortgage the interest rate is insanely critical.

But on a 6 month loan, the interest rate isn't even close to being crucial. Now don't get me wrong here, I'm not saying that you should throw the interest rate out the window.

The rate that you pay will have an impact on the profits you make IF you successfully complete your deal. And this here is really the point I'm trying to make...

Getting the deal successfully completed - meaning you paid your loan off on time and you profited is the most important thing you need to account for.

We see so many people who focus in on things like the interest rate, trying to get one or two points lower, when they should have been focusing on getting things in place to make sure they got the project done on time and under budget.

That has a bigger effect on your profit margins than the interest rate does. Plus, when you actually have your team in place that will allow you to get your project completed, then you can start focusing on finding lower interest rates.

It is just a slight shift in mindset that makes all the difference. Because remember, you're investing in real estate here, not shopping for a mortgage on your personal residence.

Now you may have been taken back by me talking about building a team. Which leads me to the second point of this post. There's ONE thing that will prevent you from ever becoming successful as a real estate investor.

This one thing is over looked by the vast majority of people who try to become a real estate investor. I've personally seen it contribute to more bankruptcies to new real estate investors than any other factor. If you really want to avoid it, then it is imperative that you should have a team of experts and mentors in real estate investing before you make your first deal.

This shows that instead of focusing on finding lower interest rates while looking for hard loans, an investor should focus on finding good real estate investment deals.