Fixing and flipping assets can be a very rewarding job in the long run. However, starting out may be a little complicated – especially if you are a complete beginner. Despite what you may have heard about needing little to no money to start flipping houses, the truth is that you need a certain amount of capital before you can start looking for fixable properties.
If you already have a sufficient amount of money in your bank to buy a house to flip, chances are that you wouldn’t have been reading this article. Therefore, we can safely assume that you are looking for reliable ways to get money so you can invest in your fixing and flipping business.
Fortunately, not having a large sum of money in your bank account doesn’t put an end to your dream of fixing and flipping houses. Read on to find out everything about hard money lenders for beginners.
Hard Money Lenders for Beginners
The first thought that may cross your mind if you’re planning on investing in real estate is how you would come up with the money to buy the first house. You know that selling it at a higher price after fixing and renovating it would help you collect enough capital for your next property, but it is crucial to find the most suitable way to overcome that first challenge.
Since you don’t plan on keeping the house for long, getting a mortgage wouldn’t be a very practical decision. So what other option do you have?
Answer: Hard money loans.
These hard money loans can be extremely helpful for investors in need of financial assistance, covering a range of costs such as home purchases, carrying costs, repairs, and renovations, among other things that you may need to address while fixing and flipping assets.
However, if you haven’t heard about or accessed hard money loans in the past, you may find the entire idea a bit shady. To some people, it may even sound too good to be true. “What’s the catch?” you may wonder.
You can relax knowing that hard money loans are a hundred percent legitimate. So if you’re planning on investing in real estate for fixing and flipping purposes, here are a few things you should know about hard money loans.
What Exactly Are Hard Money Loans?
There are a number of ways in which hard money loans differ from traditional ones. For starters, hard money loans tend to be for a short period of time. In addition to that, you do not need to have solid employment, property assets, or even a good credit score to qualify for hard money loans.
Typically, hard money loans are used to cover costs that you may incur during the process of fixing and flipping a house, as addressed earlier. It wouldn’t be entirely false to say that hard money loans were designed for this purpose.
Who Qualifies for Hard Money?
Just because you don’t need a good credit score to get a hard money loan doesn’t mean that anyone can walk up to a lender a demand $100,000. Despite being much more relaxed than traditional banks, hard money lenders do have certain requirements about who they will provide loans to. Different lenders will have different sets of requirements for a person to qualify for the loans.
In general, you are more likely to get approved for a hard money loan if you already have some experience in fixing and flipping houses. However, assuming that you don’t, having a preset legal business structure can significantly increase your chances of getting approved. You need to prove that you will be using that money to flip houses so that the lender has a guarantee that the money will be returned. Some lenders may also require a down payment. So make sure that you are aware of the particular lender’s requirements before pursuing them further.
How Much Is The Interest?
Now here is the catch with hard money loans: They come with a higher interest. This may not come as a surprise considering how much easier it is to get a hard money loan as compared to a traditional loan. Since there isn’t an official regulation on hard money loans, the interest rate may vary from lender to lender.
In general, the interest is paid on a monthly basis until the loan is paid back. The timeline for the repayment is also usually determined in advance. If you plan on paying off the loan before the time period, you may have to pay a prepayment penalty since it reduces the amount of money the lender would make on monthly interest payments. In addition to these, you will also be required to pay an origination fee before the approval of the loan.
How to Find a Hard Money Lender
As mentioned earlier, there isn’t proper regulation about who can lend out hard money loans. Therefore, you need to be extremely careful while finding a hard money lender. However, in today’s digital age, it wouldn’t be too hard to find a hard money lender that is professional and reliable.
Like anything, your best source to find a hard money lender is the internet. Look up local hard money lenders and perform a thorough background check. If they have a good clientele and a number of satisfied customers, that is a good indication that they are reliable. You can also get in touch with other people who fix and flip homes to find the hard money lenders they work with; this will give you a better idea about who’s reliable as you’ll have first-hand reviews.
Get In Touch with DFW Specialty Lending
If you’re looking for hard money lenders in Dallas, consider getting in touch with DFW Specialty Lending. We provide a reliable service with the most competitive rates on hard money loans in the area. Contact us for a no-obligation consultation today.