Some people look at hard money real estate loans as a last resort, but if you are planning on buying fixers to flip and you do not have the cash, hard money is about your only option.
There is still a lot of money to be made flipping houses in some markets, but flipping takes large chunks of cash. Most people can come up with the money for a down payment, but the repairs and up-grades cost more than many people allow for.
So if you have a house that is unfinished and run out of money it's best if you have a back-up plan. The best back-up plan I know of is having access to a good hard money lender.
Some not all lenders will loan money for repairs. But don't wait to run out of money first. Find a lender that will work with you before you start your project. Many Real Estate Flippers Use Hard Money As Their Primary Source of Funds, So Keep an Open Mind
Keep this in mind, if hard money loans did not work, then no one would use them. Today I cannot tell you of one conventional lender that would make a loan on a trashed out fixer. Regrettably most fixer property on the market today is in poor condition, so your options are pay cash or find some dependable hard money lenders to work with.
It this real estate market there are quite a few borrowers with good credit and assets that rely on hard money to do their deals. The main reason is if you have a relationship with a lender they can close escrow FAST Sometimes this is how you get the deal. Being able to close fast with out lots of conditions.
Another thing to keep in mind is If you are Self-Employed banks and mortgage lenders will not give you the time of day.
If you want some additional information go to the following site: Residential Hard Money Loans.
one of the primary conditions to qualify for a Hard Money Loan is equity in the property and positive cash reserves.
In today's hard money lenders are reluctant to loan more than 65% loan to value. This means that you must come in with 35% cash for the down payment. On a $100,000 property that is $35,000 plus closing costs. Traditional lenders want longer term loans so in most cases they will turn you down even if your gold plated. On the other hand hard money people like to turn their loans because they collect a fee every few months. This is the price you pay to flip houses if you do not have the cash to do the deals.
I have used investors in the past and there are lots of people that like making money, but it takes time to prove yourself. What I recommend is start small with a few investors and make them an offer they can't refuse.
After a few deals they will loosen up and if you make them enough money with no problems you will have a long term investor.
In today's real estate market private lenders are skeptical because some of them lost lots of money in the real estate boom. After taking some big hits it takes a few years for them to heal up and their greed starts to grow.
In case you have not figured it out yet the real estate market is driven by supply and demand and Greed... Greed is what keeps investors coming back after they have taken some hits.
I don't hear much about equity loans or asset loans now day's. Must be all the easy money has gone away.
The main reason some borrowers are willing pay for hard money is because it's the only game in town. Another reason is this type of private loan can close fast because they do not have all the government guidelines the banks must deal with.
For house flipping traditional financing is just not available because of situations like pending foreclosure, bankruptcy and trashed out houses that are not livable.
Why do some lenders make such loans? They collect huge fees and the low loan to value ratio gives the lender plenty of room if things do not work out.
You may be surprised to hear this, but Hard Money lenders do not want to foreclose. They hate foreclosing because it takes time and it is very expensive. What Hard money lenders do want is to collect loan fees and churn their money.
If you think having better credit may improve your ability to borrow money at better rates, check out this site and go to work on your credit. Credit Repair Letters This has worked for tons of people.
Some banks still hold interest in Hard Money companies, but most got out or were forced out by the government during the real estate crash. But one thing you can bank on and that is if there is a buck to be made they will be back.
This is the bad news You can expect to pay points to get a hard money loan plus you will be paying from 12 to 21 percent annual interest. State usury laws set the upper limits on interest rate.
All lenders want to be first in line, so they will require that no other loans or liens are on the property. What first position means if the property should happen to go to foreclosure they get paid first.
All Non-Traditional lenders have an Exit Strategy in the event the loan goes bad. That exit strategy is the Quick-Sale Value of the real estate.
What does quick sale mean? It is what the property would sell for on short notice. Short notice is 30 days or less.
If you meet-up with a lender that requires up-front fees prior to funding run the other way because they are probably crooks. This does not apply to appraisal fees.
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