3 Reasons House Flippers Use Hard Money Loans
3 Reasons House Flippers Use Hard Money Loans
Looking to invest in real estate? Finding the right loans for your investment doesn’t have to be tricky. Hard money loans can be used for almost any type of real estate investment. Hard money loans differ from your traditional mortgages or small business loans and offer more flexibility for your investments. So why would someone want to use a hard money loan?
Real estate investors, such as landlords or house flippers, use hard money loans for the purchase, repair, and selling off their investments. They turn to hard money loans as they offer features, unlike traditional lenders.
We break down the top 3 reasons investors use hard money loans for their investments.
Asset-Based Loans
Hard money lenders are unlike other types of lenders because of how loans are valued. Most hard money lenders offer asset-based loans. An asset-based loan takes a value of a loan from the property value. Some lenders use the after repair value (ARV) of a property repair plan to base the loan value as well. By basing the loan in the after repair value, these lenders can offer more for a property than its current value. These higher loans can also help fund the repair and purchase of an investment property.
Asset-based loans come with higher interest rates and a lower term limit than most other loans. Due to the nature of real estate investments, this might be an advantage to the real estate investor as it makes it easy to move from one investment to the next without any prepayment penalties.
Real estate investors often have multiple investments at any given time, and asset-based loans make it easy for them to get approval for their loans.
No Credit Checks
Another great advantage of hard money loans is no credit checks. Hard money loans are asset-based loans and take their value from a real estate investment, not a borrower’s credit history. This makes real estate investing more accessible for investors from all backgrounds.
Most real estate investors have many investments or businesses at a given time, and too many lines of credit can hurt their stories negatively over time. For first time investors, this makes it easier to get approved for a real estate investment, as they do not need to provide income or a base investment in their credit.
Traditional mortgages rely entirely on a borrower’s credit and income history. To invest in real estate the first time that can make it hard to get approval for a rental or flip! By basing the value of the loan on the after repair value of a flip, investors can get more for their money, and easily with hard money loans.
Speed
For house flippers and real estate investors, speed means everything. Opportunities move quickly, so they need loans that can move as quickly to close. Hard money lenders can fund so quickly because of the nature of the loan.
A hard money lender in Arizona can approve a loan in less than 12 hours, and fund that loan in 2 days. For real estate investments that need fast funds, hard money can be a deal saver! With an asset-based loan, there are no credit or background checks. Other requirements that traditional lenders use can take weeks to get approved, so basing the loan on the asset, hard money loans can more quickly.
For sensitive deals that need to fund and close quickly, hard money lenders can make it happen with fast turnarounds and funding on investors’ timelines. Real estate investors often rely on money lenders to get their most sensitive and high pressured deals closed.
Summary
Hard money loans can be used for house flipping, rentals, and nearly any real estate investment. For many investors and house-flippers, having reliable hard money lender is a must. These investors depend on hard money lenders to get their deals funded quickly and easily!
3 Reasons House Flippers Use Hard Money Are:
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- Asset-Based Loans: For investors wanting to get the most out of their investment, hard money loans offer more than traditional loans. These loans are based on the after repair value of a property, and investors can use this loan to buy, repair, and sell their flips!
- No Credit Checks: With no credit or background checks, hard money loans make it easy to get approved quickly for investments.
- Speed: Hard money loans can approve as quickly as 12 hours, and fund in 2 days or less, making them perfect to close deals faster than any other loan!
Have you used a hard money loan?
About the Author: Catherine Way graduated from Michigan State University, and with her Bachelor of Advertising, Specialization: Graphic Design. Working as a content marketer for business, mortgage, and real estate industries. She currently writes and reports for Prime Plus Mortgages.