Hard Money Lenders Come To Good Deals

Hard money lenders have one simple philosophy: find a good deal and they will fund it for you.

Also known as private lenders, they will hardly scrutinize your creditworthiness. What they care about if the collateral you will present. What a hard money lender will consider as collateral is the property you are about to flip. He will approve your loan and accept the property as collateral if the house has potential to produce positive returns. So, if you want to tap this form of creative financing, be sure to only find the best deals in your area.

When it comes to how much you will get from them, that will depend of the after repair value (ARV) of the property. Hard money lenders usually grant borrowers 70% of the ARV, or the price of the property after repairs and renovations have been completed.

You may think that this amount is insufficient. In reality, you can already flip a house without even digging into your pocket with this amount. For example, you plan to buy a $90,000 fixer upper home. Your estimate for repairs is $15,000. That means your expenses will be $105,000. If the ARV of the property is $150,000, youll get 70% of that, which is $105,000. In this case, you will be able to flip a house without spending your own money.

Both traditional and hard money lenders technically do not grant loans for repair costs of the property you want to rehab. But you stand to get more if you use hard money financing. If you borrow from banks and other traditional lenders, you might only $90,000, which is the purchasing price of the fixer upper.

Compared to traditional sources, a hard money lender imposes a higher interest rate. An 18% rate is normal in this business. This high rate usually discourages a lot of investors from tapping this form of financing. What neophyte investors do not know is that this rate will hardly matter. Remember, flipping houses is a fast-paced form of investing. You need access to cash, fast. If you go to traditional loans, you must wait for around 30 days for the processing of your loan. By that time, some other house flipper could have snatched the fixer upper you want to rehab.

Hard money financing, on the other hand, only takes days to process. As earlier mentioned, hard money lenders will not scrutinize your income and if you indeed are capable of repaying the loan with your current status. They take shorter time to approve loans because they only inspect the profitability of the property. Learn more hard money secrets at REIwired.com, your online source of educational material about real estate investing.

by: Carrie Dawson

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