Fixing and Flipping Houses have become a very profitable business today, but it costs a lot of money to fix and flip houses. Real Estate Investors need lots of capital to purchase and renovate a house before they can flip the house for a profit. In addition, they need to pay contractor fees, listing and broker fees, holding costs, and much more. House Flippers find hard to qualify for traditional loans cause of their strict lending regimes. Luckily, there are hard money loans options available for them. Hard money loans are the most useful and fastest way to get money for investors who are new to fix and flips or who have tarnished credit. Hard Money Loans are most suitable for experienced or inexperienced flippers who need money quickly. Fix and Flip Investors typically use hard money loans to purchase and renovate a property for flipping.
Why are hard money loans better than bank loans for Fix and Flip funding?
- Hard money loans are faster & flexible compare to traditional bank loans. It usually takes 24 hours for loan approval and 5-10 days for funding.
- A hard money loan is a short-term loan secured by real estate that can be used to purchase, renovate, and sell a property within 1 year.
- Hard money loans offer easier qualifications compare to all other financing options. Novice home flippers can also get qualify for hard money loans because hard money lenders care more about the property and its potential value than about the borrower’s experience or financial qualifications.
- The credit score is not the primary factor in hard money loans. Hard money lenders prefer to take look more at the collateral and borrower ability to pay. On the other hand for banks, credit score is the primary factor to make the decision for loan approval.
- In the case of hard money loans, borrower’s income is of lesser concern, for traditional loans borrower must have good credit with documented income.
- Hard money lenders offer very flexible terms to Investors which suits their financial situations.
- Hard money lenders offer up to 70% amount of after-renovation value (ARV). For example, if a home costs $50,000 but the ARV is $100,000 then you can borrow $70,000. After paying the $50,000 purchase price, you’ll have $20,000 left for closing costs, lender fees, rehab, carrying costs and selling expenses such as staging, marketing, and real estate agent commissions. If you can stick to that budget, you won’t need any money out of pocket to flip the home.
- A hard money lender typically charges between 11 and 18 percent interest and 3 to 10 points. For bank loans, the closing costs usually 2-5% of the total loan amount.
- There is no prepayment penalty in hard money loans.
- Hard Money Loans work for both experienced and inexperienced fix and flippers finance investment projects when whereas banks only work with inexperienced house flippers.
The Bottom Line:
If you’re looking to tap into the growing real estate market for your personal financial interests, but your credit score is entangling your efforts, you can utilize hard money loans to buy a house that needs some work and later you can resell at a good appraisal value. A hard money loan is good for the experienced and inexperienced fix and flippers. With the real estate market expanding by leaps and bounds every single year, many real estate investors are keen to get their portion of the market share. Property prices are on the rise, hence savvy investors can buy low, and sell high to make a good profit.
Magna Capital Group, Inc is one of the most experienced and trustworthy hard money lending companies across California which helps its clients in many different types of situations realize their property ownership dreams. We provide fix and flip loans to experienced and inexperienced fix and flip investors on attractive interest rates with no prepayment penalty.
For specific information on whether or not a hard money loan is right for you, please feel free to call us today at (310) 734 4044 or email at email@example.com. We will provide our full support to make your fix and flip projects successful.