In Detroit Michigan real estate markets, hard money can be a useful tool in the purchase of Detroit foreclosures, intended flips or rehabs. Traditionally, this would require significant down payment from the investor because of the low loan to value given. However, for an opportunity to buy valuable properties at a distressed price, hard money may be useful.

With hard money, investors have the power of leverage, which multiplies the return on your Detroit investment properties. You only need to invest a small percentage of the house’s value, such as 10%, yet you earn your returns on the entire value of the home.

For example, you want to purchase a $100,000 Detroit investment property, and you have the option of putting 10% or 20% down on the home. If the value of the home grows to $110,000, then only placing $10,000 down on the home will give you a 100% return on equity. Had you placed 20% down on the home, your ROE would only have been 50%. As long as the profit you reap is larger than your interest costs, then in the long-term, using leverage is always more advantageous.

The supply of Detroit real estate, available at less than half of its appraised value just a few years ago, creates the ideal opportunity to accumulate Detroit investment property or flip a fast rehab.

While declining markets can be tricky, a knowledgeable contractor or handyman can renovate a Detroit rehab into a suburban residential viable rental property or flip sale. For would-be buyers of Detroit Michigan real estate, hard money loans may be the fastest kind of loan transaction to closing, since there is usually no verification of income, employment and credit.