For most people within the house flipping business, the question that arises quite frequently is, “Where do I source funds for my next deal?” The nature of this business dictates that you have ready cash to cut into the discounted prices. However, with bad credit ratings and other loans haunting you, it may prove difficult. Hard money lenders seem to be a viable solution.
Hard money lenders provide quick loans for real estate investors where traditional mortgage loans are not an option. The loans are easy to apply without the tiresome bureaucracies in banks. The loans are appropriate for speedy transactions needed in the real estate industry.
Hard Money Vs. Traditional Banks
Hard money loans provide flexible financing options than traditional bank systems. First, they are easier to apply for as compared to conventional bank loans. Banks typically have strict and frustrating criteria for loan allocation that may mess up your deal. Hard money lenders focus more on the property value than your credit history.
Secondly, the loans are processed faster. Most lenders approve the loans within two to five days, with some lending within 24 hours of application. Count yourself lucky to find a bank that accepts a loan in less than a week. Hard money lenders provide quick access to capital with a less stringent approval process.
What Do You Look for in a Hard Money Lender?
Finding the right money lender to finance your next fix and flip loan requires proper research. Here are a few tips to consider:
- Search locally: Most hard money lenders prefer to inspect the property in-person before offering a line of credit. Additionally, lenders in your state understand better the market value of the local real estate industry.
- Go for Transparency: The lender must be upfront on all fees, including interest rates and down payments.
- Licensed dealers: It’s vital for the lender to be certified by their state department for real estate. Most lenders have a real estate broker’s license.
- Look for lenders specialized in hard money lending: You should consider applying with a firm specialized in asset-based lending.
Finding a Hard Money Lender
It all boils down to your research. Perform a quick survey of local lenders. Look into their customer reviews and complaints to weed out fraudulent firms. There are many online directories for hard money lenders. Referrals can also be a great way to find your perfect lender.
Now that you’ve found the right creditor for your flip loan, how do you get your loan approved?
Loan approval is simple. To start with, you need to build a rapport with your lender. You can easily do this by setting up a meeting with them so that you build trust. Secondly, you need to get your numbers right. It is critical to be accurate in your accounting. Lenders can smell dirty, cooked-up renovation figures from a mile away.
Moreover, work on your negotiation skills. It will help convince the loaner that you can close the flip deal. You need to establish trust with them for faster processing of the loan.
Ensure you understand your hard money needs and select the best lender for your flipping deal.