hard money lender

Posted by & filed under Uncategorized.

So you want to flip a house. There are a lot of reasons why house flipping is currently appealing to a lot of young, would-be business people. For one thing, there are a lot of houses currently entering the market. Due to the economic hardship currently occurring, many houses are being foreclosed upon, which results in them being sold at auction. While nobody is happy that people are struggling financially, this does leave the opportunity open for those who are interested in buying a house relatively cheaply and then flipping it for a profit. For another thing, house flipping offers a potential income during a time wherein people need to be creative in their approach to make money. A lot of industries and job fields have been hit hard by the pandemic, leading to job loss and a halt or slowing in hiring within them. For that matter, house flipping allows you to be your own boss on a potentially fun project. The issue that some run into is finding the capital for flipping a home. Few people have the money upfront to buy a house; they need to seek loans. While many find themselves unable to obtain typical loans, loans offered by hard money lenders may be more of an option for them. Let’s look into how hard money loans work for potential house flippers.

1. Know What You Need

If you haven’t already done extensive research on the amount of money you’ll need to flip houses, get to that right now. The is no point in you approaching hard money lenders if you aren’t sure about that number. House flippers of course need the money to buy houses, but they also need the money to renovate them. After all, part of the point of house flipping is to invest in repairs. However, if you spend too much on repairs, you’ll lose your profit. You will also need the money to cover property taxes, utilities, and homeowners’ insurance until the house sells. Now, if you find yourself dealing with a typical mortgage loan, you may end up dealing with that loan for quite a long time. Hard money loans differ in this sense.

2. Understand What You’re Committing To

Hard money lenders are great options for those who would typically have some difficulty getting typical mortgage loans for their house flipping projects. The issue with getting a mortgage loan for a house you want to flip is that many traditional mortgage lenders prefer experienced flippers. The paradox being, of course, that you can’t become an experienced flipper without some level of experience. A hard money loan is giving you that money that is hard to come by, albeit under certain terms. Usually, hard money lenders will base the amount that they lend based on the home’s value after repairs are made, which is all the more reason for you to know exactly what you need to do to the house well ahead of time. If you miss your numbers on the value significantly, you will still need to pay back the loan. However, hard money loans are often offered with shorter terms as well, which means that you would presumably pay the loan back faster if your financial forecasts were right. Usually, a hard money loan term is six months to a year; but if you do need longer terms, of up to two to three years, you can potentially get them under certain circumstances.

3. Weigh Your Options

Ultimately, hard money loans can be fantastic options for those who want to get their feet in the proverbial doors of house flipping. But you need to be fully aware of your terms, and make sure that your predictions are reliable. A hard money lender will assess your house flipping project’s potential as well, but you need to be set on flipping a home, and making sure that you get the maximum amount of profit.

While every loan comes with its responsibilities, these present flippers with the ability to get started. They should be carefully evaluated, but also treated like a potential opportunity.

Comments are closed.