Hard Money Loans for Fix and Flip Real Estate Investments
Pumping money into flipping houses can bring a broken home into life but this real estate investing takes a heavy toll on your finances. If you have the nuts and bolts of fix and flip, you’ll find hard money loans ideal for funding the short-term project. Unlike traditional banks, hard money loan lenders render expedited loan approvals and financing as you rush out on the fast lane of real estate investing. Banks don’t put the seal on the deal but may exercise the right of rescission midway jeopardizing or canceling the deal. Hard money lenders do not withhold funding fancifully making them ideal for critical funding. Apart from flexibility, speed, and zero red tapes, this form of financing has many benefits.
Less Stringent Requirements
Compared to bank funding, hard money loans for flipping houses have fewer and less stringent requirements. Lenders require the borrower to demonstrate an interest in the property, an efficient exit strategy, and stream of income. Investors with a bad credit score, ongoing bankruptcy proceedings, short sales, and many mortgages can still borrow.
Gain a Competitive Edge
Real estate investors appreciate the meaning of the idiom, “money does not speak, it swears” in their domain. Investors known to buy property on the nail have a distinguished track record get top-dollar price tags and quickly acquire flipping houses on public auction or off-market. Similarly, a home rehabilitated with hard money loan gives potential buyers assurance as to quality and value. Banks peg financing on many conditions making it unpredictable and uncertain for consumers to assess a transaction. Hard money loans allow you to seize more opportunities.
Lender of Last Resort
Traditional banks have for long shied away from fix and flip real estate investing while they limit the amount of borrowing. When cash in hand gets gobbled up before completion, you’re thrown up the creek without a paddle. Hard money financiers focus more on the investor’s equity in the property. The more flipping houses, the better as the borrower has more collateral, hard money loan providers can finance short-term projects such as fix and flip to overhaul the property and sell quickly.
Downsides of Hard Money Loans
Extremely High-Interest Rates
A consumer credit always has a lower interest rate in contrast to hard money funds. Lenders cite increased risks and costs of funding as the main driving forces of high-interest rates. Some hard-money-lenders impose not only usurious interest rates but also a loan sourcing fee, typically a percentage of the principal loan.
Restricted to Short-Term Needs
The upper limit for hard money loans for real estate investing or flipping homes cannot exceed five years. Funding companies become more risk averse with longer durations forcing them to service short term loans only.
Down Payment or Equity
Although you can get funding this way for flipping houses at the drop of a hat, lenders insist that borrowers must show their equity in the investment. Absent a down payment or interest on the part of an investor, the hard money lender shoulders all risks.