Should I Use a Hard Money Loan to Invest in Commercial Real Estate?

If you are an investor looking to diversify your portfolio and increase your annual dividends, commercial real estate is a wise investment to make. Just keep in mind that investing in commercial real estate or rental properties is not as straightforward as buying and selling your stocks. Many commercial real estate investors prefer more of a backseat, usually opting for crowdfunding operations or even real estate investment trusts for financing their acquisitions. But for those, perhaps yourself included, who wish for more of a direct ownership approach, a hard money loan could be a profit-effective, fiscal opportunity to explore.

Continue below to learn more about taking out a hard money loan for commercial real estate investments, plus some of the most noted pros and cons.

Commercial Space Planning Permitting Indianapolis Indiana 317-253-0531
Commercial Space Planning Permitting Indianapolis Indiana 317-253-0531

Short Term Lending With Hard Money Loans

A hard money loan is a type of short-term cash advance used by commercial real estate investors as leverage so they can adequately finance their investment prospect. Most commercial lenders and conventional banks do not offer hard money loans. These loans are primarily issued by private lenders.

Often times, such loans are used by commercial proprietors looking to quickly renovate and remodel a property for resale. Hard money loans are also a popular choice among investors because they can actually cut through the red tape, which makes the acquisition process much faster. And the faster you can acquire an investment property, the sooner you can turn on that cash-flow.

Advantages of Hard Money Loans

Although there are several intricate and perpetuating advantages of using a hard money loan, the main ones are easy, quick turnarounds and loan flexibility. There are many times when a commercial real estate investor is presented with a great investment opportunity and does not have time to waste jumping on it. While traditional loan processes can drag out, potentially causing an investor to lose out on the deal presented to them, hard money loans tend to release funds a lot faster.

Hard money loans are also advantageous in terms of loan forgiveness and flexibility. Not only is it more effectual to negotiate with a private lender on the terms and conditions of such loans, but it is possible to restructure payment schedules, customize loan maturity dates, and even reduce some fees.  


When it comes to investing, where there are advantages, there are always a few disadvantages. As for hard money loans, the same expectation applies. Although there are good pros of hard money loans, there are some cons that might sway your decision to move forward. For starters, hard money loans are easy and convenient, and convenience costs extra. Such loans are more expensive, which can be considered a disadvantage to some.

Furthermore, hard money loans are used as bridge financing, so their terms are much shorter than traditional loan arrangements. Basically, you have less time to pay off a hard money loan than you would with a conventional loan.

Are you looking for a qualified commercial general contractor to help you with your real estate acquisition and space planning needs? Contact BAF Corporation at 317-253-0531 for professional commercial construction management and space planning in Indianapolis, Indiana.

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