Flipping houses is the dream of many people. The return potential is excellent, the work is exciting and creative, and the asset is tangible and necessary. Whether you want to wield a hammer or simply a pen, knowing how to use financing to optimize your investment is essential. This blog post will cover how to flip houses with hard money.
What is Hard Money
Using a hard money loan to purchase an investment property is faster and offers terms that better meet the borrower’s situation than a traditional mortgage loan. A hard money loan is backed by the value of the asset being purchased rather than the income and credit of the borrower. For those with atypical income situations or a poor credit score, a hard money loan can give them access to real estate investing.
Typically, many homes are used as primary residences, and they are purchased with long time horizons, under the assumption that the purchaser will live there for many years. For traditional mortgage lenders, they’re making a long-term investment in the individual borrower, even up to thirty years. That’s why it makes sense for the underwriters of those loans to be highly meticulous when assessing the borrower.
On the other hand, hard money loans have terms between six months and two years. Their interest rates are higher, but they are also much faster to close and don’t evaluate the borrower to nearly the same degree as traditional mortgage lenders.
How to Find a Home to Flip
To get started, consider your goals in real estate investing. Identifying the ideal city, neighborhood, home type, and the purchase price is a daunting task. If you plan to conduct many of a property’s renovations yourself, think about where you’re willing to commute (or travel) to for the next 3-12 months. Additionally, if you have a sizeable amount of money to invest, consider the home prices near you. Are the homes priced so low that you’ll need to purchase a plethora of properties to leverage your wealth adequately?
To find a real estate investment property, you can always resort to getting behind the wheel and cruising around the city scoping out “For Sale” signs. However, if you are expanding your search to other locales or don’t have the time to beat the pavement, contact a real estate agent and tell them you want to start investing in real estate. Be open and honest about your criteria and budget. They can help save you time, but make sure they know you’re a real estate investor and not shopping for your own primary residence. Although it may seem like a subtle discrepancy, each requires a different approach.
How to Finance a Real Estate Purchase with Hard Money
One of the first things you can do when embarking on a new real estate investment journey is contact a hard money lender. You don’t have to get a loan that day – simply establish a relationship with the lender and discuss your goals together. They can help you determine your total loan amount based on the cash available to use as a down payment on your investment property. Then once you find a property and your offer is accepted, the lender will have no issues closing on your financing quickly and getting you started on your renovations.
Flipping houses with hard money is better than using traditional mortgage loans. A conventional loan is slow to process and not structured for real estate investors. A hard money loan is ideal for house flippers who want to get started quickly. If you’re a real estate investor looking for a hard money lender that closes in as little as five days, contact us at Park Place Finance to get started.