Most new real estate investors are not familiar with Fix and Flip Loans. But these few tips can set you on a path to use these Loans successfully to launch your real estate career.
Most people are familiar with traditional bank Loans and mortgages. We have all been through the process when purchasing a home. But when you are interested in investing in real estate as a career or even a side business, you quickly learn that these conventional Loans are not going to meet your needs. One of the most widely used alternatives to a bank loan is borrowing from a hard money lender. While this might sound a little scary, hard money is an entirely legitimate industry. It merely means that you are getting Fix and Flip Loans from a private lender and not the traditional bank or loan institution.
Because hard money lenders are private entities or individuals, there is not as much advertising to promote these lenders. In some areas, you might even find it a bit tough to locate hard money lenders when you are new to flipping. So, it is crucial that you begin to build a network in the industry. Speak to other flippers, real estate investors, and realtors to learn who the best hard money lenders in the area are, and how to contact them. Word of mouth from satisfied borrowers is a great way to determine who is honest, upfront, and easy to work within your local hard money game.
Hard money lending moves at a very fast pace as compared to traditional lending, so it would be best if you had all of your information ready when you speak to a hard money lender. In general, you will need to have the address and description of the property that you are interested in. Also, prepare a project plan to demonstrate your professional experience in flipping or rehabbing and your budget. Finally, have documentation ready to prove that you have access to the funds needed for the down payment and the renovations that will be required on the property. The more documentation you have to show the lender about the property, the faster he or she can decide if you and your deal are a suitable risk.
While the speed of evaluating a hard money loan application is much faster than a typical loan application, there is a cost associated with that speed. In most cases, you will pay anywhere from about 10% to 20% interest on Fix and Flip Loans. You will also need to pay points, which are equal to 1% of the loan value. The lender will determine how many points he or she wants to fund the loan. Other loan costs will include an appraisal of the property and possibly a survey of the land.
While you might not be familiar with hard money Loans and lenders, they are an excellent solution for Fix and Flip Loans. And the time that you invest in learning the process and possibilities for hard money is sure to pay off. Most flippers find that building a long-term relationship with one or two hard money lenders is the perfect way always to be prepared to make a fast purchase when they see a great deal on a property.
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About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.