Tips for Using Hard Money Loans for Your Investment Property
You have likely wondered how flippers are able to completely turn a drabby property into a stunning house in what seems like a matter of days. How are they able to fund the project? If your answer were a traditional bank loan, you would be wrong. Many in the real estate work use hard money loans for their investment property as it’s quick and relatively easy—and here is how to do that.
Hard Money Loan
A hard money loan is a non-conforming loan that does not come through traditional avenues of access. With a hard money loan, the lender assumes a much higher risk than a traditional loan, which is why most banks will not lend this type. As such, interest rates are higher, and the expected turnaround is short, but the profits should greatly exceed the loan amount. Moreover, lenders will usually overlook your financial factors, focusing on the property instead.
Choosing a Lender
Choosing a hard money lender is one of the most important decisions. Considering the niche market, you might think all lenders would operate similarly, but that is not true. As such, you must be on the lookout for some clear signs your potential lender is not trustworthy. One of the biggest signs is a hard money lender with low-interest rates, which may indicate problems down the line.
Talk to Your Lender
With a hard money loan, you should be able to turn around your property in as little as three years. However, many of us know that the real estate world is constantly in flux; it is certainly a risky business. Throughout the course of your flip, you are likely to face a couple of problems, some of which are completely out of your control. That is why it is a good idea to talk with your lender and ask them what they provide in terms of loan extension should unexpected events arise.
Confirm Property Value
One of the best tips you can receive when looking for hard money loans for your investment property is to confirm its value. Most lenders will want to do this, especially if you are completely new to hard money loans and investments. If you are struggling to find a lender, confirming the value of your investment and your financial history will make it much easier for you to obtain a hard money loan. Moreover, make sure you come prepared with all the financial information necessary.