Whether you have been investing in real estate for a while, or you’re just now thinking of diving into this world, there is no denying the fact that flipping houses has presented itself as an interesting opportunity. An opportunity that can lead to quick profits, allowing you, thus, to make money as soon as possible, often even without having any of your own cash to invest with. After all, there are financing solutions you can use, instead of using your own cash, which makes it possible for you to invest even if you’re not in a good place financially.
Here’s a step by step guide to flipping houses: https://www.entrepreneur.com/starting-a-business/the-beginners-guide-to-flipping-houses-for-profit/464513
Of course, as mentioned above, you can, and you should, find various financing solutions that can help you invest and start flipping. And, if you’ve done any research whatsoever, then you have most likely already come across the options of hard money loans. But, there’s no doubt that you have some questions about this.
You want to know whether you can use hard money loans to flip houses in the first place. Then, you want to know whether you should use them, if this winds up being a possibility. And, finally, you want to figure out how to get a good one, in the event that you decide to do so.
All of those are, without a shred of doubt, rather important questions right there. And, it is completely normal for you to want to get your answers before going any further and before making any concrete moves towards making this happen. So, what we are going to do right now is answer those questions for you below, in an effort to help you get a better understanding of this concept, and figure out whether you can or should use it to your advantage, as well as how to use it right if you choose to do so. Here is a guide on financing investment properties that could also be helpful.
Can You Use Hard Money Loans to Flip Houses?
Let us begin with the basics. Hard money loans are, as you may understand already, short term loans that are backed by the property you are buying, instead of being backed by your income and depending on your credit score. This, in itself, makes the option appealing, because it allows you to get the money you need even if you don’t really have a great credit score to brag about. Plus, the entire process is quick, meaning investors can get their money in no time.
Now, since you most probably understand how these loans work, let us immediately proceed towards the first important question. Can you actually use them to flip houses? You know that a lot of lenders are wary of extending loans when some properties that aren’t in a great condition are involved, which is why you’re not sure whether this is even an option for you. Because, when flipping houses, you’re getting them in a condition that can’t be considered amazing, and then you’re renovating them to sell them for a profit.
This concern is legitimate. But, I have some good news for you. In short, you can definitely rely on hard money loans for flipping houses. There are plenty of lenders out there that will be willing to provide you with the funds you need, backing the loan with the property you want to buy. So, there’s no doubt that you can use this option to your advantage.
Should You Use Them?
The question now changes. Having understood that this is a legitimate option for your house flipping projects, the next thing you want to do is understand if it is actually a good one or not. In other words, you want to figure out if you should actually use this option to your advantage. What is it that makes hard money loans appealing nowadays? What is it that makes them a good option for flipping houses?
Well, as you may have guessed it, the mere fact that the entire borrowing process can be completed in a couple of days is a huge advantage in itself. And especially for those investors that flip houses. Because, if you decide to rely on the traditional mortgage option, there is no guarantee that the seller will be willing to wait for that long to get the money, which is why they may find other buyers – those that can act more quickly. With hard money loans, though, you can be the buyer that acts quickly.
Furthermore, there is also the advantage of not having to worry about credit scores. Even if it is poor, or if your credit history is pretty much non-existent, you can still count on getting a hard money loan. This is because, as I have mentioned above already, the loan will be backed by the property, so your credit score and your income won’t play a big role here. This opens up the opportunity for people to become real estate investors even if they don’t really have any capital to count on, or any credit history for that matter.
How to Get a Good One?
Onto the final question. How can you actually get a good hard money loan when thinking of using it for flipping houses (click this to get your house flipping 101)? Well, as you may have guessed it already, it all starts and ends with the lender you choose, so this should be your main task and your main concern here. The idea is therefore, for you to research different lenders, and ultimately choose those that are known to be rather reliable and trustworthy.
Once you’ve done that, you’ll have to do some calculations related to the deal you want to close, so that you can determine the amount you need. Then, simply fill out the application and wait for the lender to approve you. As mentioned already, you won’t wait for too long, and you will, thus, quickly get the money you need to complete your flipping project.
