How to Finance Flipping Houses with Hard Money
When you enter the world of real estate investment, you wind up having a lot of different opportunities when it comes to how you want to invest. One of the things you can do is start flipping houses, and this has certainly become a rather popular strategy that can lead to substantial profits if done right. Of course, in order to succeed in this world, you’ll need to have quick access to flexible and reliable financing, which is where various types of loans, such as hard money loans, come into play.
Thanks to their quick approval process, and the fact that you don’t need an amazing credit score in order to be eligible for these, hard money loans have certainly become quite a popular funding option for a lot of house flippers. It is therefore, no wonder that you are thinking of relying on that particular option as well. So, what you want to do is learn how to actually do that.
Well, that is exactly what we are going to be discussing. But, not before we quickly go through the topic of why you may want to use hard money loans in the first place. You may not be sure why this is the right move, so we have to make things a bit clearer, helping you understand why it is that you may want to rely on this financing solution when flipping houses.
Clearly, one of the most significant advantages of this solution is the fact that the entire process is rather quick. Meaning what exactly? Meaning that you can swiftly get the money you need to buy and fix the real estate, and that is a huge plus, as it boosts your competitive advantage and helps you grab some great deals that you otherwise would have missed due to lack of funding.
Furthermore, the lenders will approve the loan based on the value of the property, and not your credit score, which is another great plus. And, of course, there is also the fact that the lenders are quite flexible when it comes to offering loan terms, meaning that they can tailor the solution to fit your specific investment strategy.
Now that you’ve understood some of the benefits of financing your house flipping projects with hard money, what you want to do next is understand how to exactly do it. So, I will take you through the steps below. This way, you will get prepared for the process, and you’ll know precisely what to do in order to get the right financing solution for you.
Learn what a hard money loan is, if you’re still not quite sure about it: https://www.experian.com/blogs/ask-experian/how-do-hard-money-loans-work/
Evaluate Your Project First
First and foremost, you will have to evaluate your specific project. Think carefully about how much it would cost to acquire the property, as well as to renovate it. Don’t forget to try and assess the expected value of the property after the renovation, and make sure that you’ll get a good ROI once the whole project is completed. This will also help you assess the loans that the different lenders will offer, aiming at choosing the solution that will lead to the highest ROI.
Find Different Lenders Online
Once you’ve assessed the project, the next thing you should do is start searching for different lenders that can offer you the solution you need. The good thing is that you’ll be able to find these online, as they understand the importance of online presence. So, start browsing and make a list of potential hard money lenders, after which you will need to start researching them in more details.
Check Their Experience & Reputation
First things first, you should check how experienced the lenders you are considering really are. The goal here is not simply to find lenders that have been on the market for a while, but to actually find those that have enough experience of funding house-flipping projects, as that is precisely what you want to do. So, take time to find the info about their experience levels on the official sites, or inquire about that directly when you get in touch with the different lenders you’re considering. Perhaps this could also help you choose the right one.
Apart from experience, you should also check the reputation of the companies you are researching. The goal here is to find reputable and reliable lenders that will be ready to tailor their solutions to your needs, and that will have your best interest in mind. And, to do that, you’ll have to read some reviews written by previous clients and thus determine the actual reputation of those professionals you are considering.
Compare the Terms of the Loan
You want to find a great house-flipping financing solution, and you believe that a hard money loan is just the thing for you. Well, it can definitely be the perfect solution, but the truth is that you’ll need to compare the actual terms of the loans offered by different lenders in order to determine what may be right for you. So, take your time to compare those terms, starting with interest rates and ending with the actual repayment schedule. This way, you’ll get to figure out which lenders offer the best solution.
Negotiate the Terms If Possible
Don’t forget that you may be able to negotiate the terms with the different lenders you’re considering. So, don’t hesitate to try it. This could score you better interest rates, a more favorable repayment period, and better terms overall. Just like you had to learn how to flip a house, remember to learn how to negotiate with these professionals to get the best possible terms for your loan.
Prepare Your Application
Finally, once you’ve gone through the whole process described above, the next thing you’ll have to do is actually prepare the application. This shouldn’t be difficult, as hard money loans require much less documentation than traditional ones. So, provide the lender with the necessary details on the current value of the property, as well as the potential for appreciation, outline a detailed renovation plan, present your exit strategy and basically give them all the information they need. Then, apply and wait for approval.
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