Why Hard Money Loan is Perfect for House Flipping
If you are into house flipping business, you might want to consider getting a hard money loan for financing. Indeed, there are general disadvantages of hard money loan, but as a house flipper, you can turn these cons around to your advantage. You will see that there are practically only advantages of hard money loan as financing source for house flipping. Here is how it works:
Short Payback Term
Your house flipping business can benefit from short repayment period of hard money loan. This gives you enough drive and motivation to turn a bad house to a saleable house in time to make money to repay your loan. You can expect no procrastination here, and besides, you also don’t want your money get stuck for long in an inhabitable house.
It is true that hard money lenders demand high interest rates because borrowers usually don’t have good credit standing and don’t have a chance at conventional loans. However, if you are a good borrower, you might have the opportunity to make special deals with these private lenders. Show them your borrowing record and see if you can provide them a fraction of your profit after selling a house.
Skewed Property Valuation
Hard money lenders normally use very conservative methods of assessing properties (used as loan collateral) to protect their interest. Being a house flipper, you practically have good knowledge about property valuation and not easily misled. So use your experience whenever hard money lender gives you property value lower than what it should be.
As a house flipper, you can easily enjoy the benefits of hard money loan to fund your business. You don’t have to go through the tedious loan processing done by banks and other conventional lenders. This is great news because real estate prices can go up and down dramatically, and you wouldn’t want to lose the chance to buy that house all because you’re still queuing for a loan. You want to operate with perfect timing: buy properties cheap and sell them at a profit. With hard money loan, you easily qualify as borrower regardless of your credit report and your loan gets easily approved. You obtain ready cash to renovate properties, cash that is otherwise hard to get by.