This post may contain affiliate links. We may receive a small commission when visiting these links. Thank you very much for your support! For more info read our Disclosure.
We want to thank Catherine Way for this post.
Seasoned real estate investors and newbies are always looking for the latest trends, whether its how to use Airbnb in a flip, how to stage for more money, or get the best deals for their latest investments.
For any real estate investor finding funding for your flips or rentals can be harder than finding the flip itself. Due to this, many investors are turning to hard money lender to get the most for their investment, while using the least amount out of pocket.
Hard money loans are a great tool for any investor use, but understanding when to use them, and how to use them properly is key, like any other investing trick.
For any investor looking to learn more about how a hard money loan may help them keep on reading.
Lesson 1: What is a Hard Money Loan
“Hard Money loans make it easy for any real estate investor to start flipping and renting today with little of their own capital. Hard money loans use a properties ‘after repair value’ to fund the purchase, repairs and everything in between to get an investment move-in ready. They often make it easy for first-time house flippers to start out, as it eliminates risking your credit, and assets. By using a hard money loan, real estate investors eliminate the risk of using their own capital on a deal, but also will still see the large returns from that risk.”
– Loren Howard, Prime Plus Mortgages – Hard Money Loans Phoenix
Hard Money loans are real estate loans that are secured in the real estate value of a property, unlike a traditional loan which is based on a properties current value, and credit rank of the borrower.
Hard money loans are secured in real estate properties, and lend on the properties After Repair Value, or ARV. To calculate this, they look at the current properties worth, estimated repairs, and calculate to find the properties after repair value.
By using an after repair value, a hard money lender can determine what the profit margin of a house should look like, making it easier to fund the repairs and purchase of a property to maximize its value.
Hard money loans make it easy for first time investors, who may not have enough of their own assets to put down for a new investment, or who may not have a great credit score and risk being denied by a traditional lender.
Another perk of hard money loans is their funding times. While a traditional loan may take weeks to approve, a hard money loan can be approved and funded in as little as two days. Which is incredibly useful or a house flipper looking to buy a property quickly, and with minimal hassle.
Even though hard money loans make it easy for many investors to start house flipping, like any type of loan there is a risk.
Hard money loans tend to be a bit risky for these 2 main reasons, higher interest dates, and shorter terms. Hard money loan being back by real estate have much higher rates than a traditional loan, as RE Tipster reports, “ Interest rates for hard money loans range from 10 – 15%”.
The other risk for investors is the terms, while more conventional loans fall around the 30 year mark (resulting in lower payments), the standard hard money loan term check in at anywhere between 6 months to 2 years.
This means higher monthly payments for your hard money loan. While this may shock home, for real estate investors these terms are pretty standard, and the time frame makes perfect sense for someone looking to fix and flip a property, or even using a bridge loan.
Now that we know the basics of what a hard money loan is, lets see the best ways a real estate investor can use their hard money loan.
Lesson 2: How To Use A Hard Money Loan
Now that we know how a hard money loan can be beneficial to real estate investors, looking for fast funds for their investments, we can look into the best ways to use hard money loans.
The top 3 used for Hard Money loans are:
- Fix and Flips Loans
- Home Rehabs Loans
- Bridge Loans
We will break down each of these below.
Fix And Flip Loans are used to buy properties, make crucial repairs to bolster the home value and then sell for a profit. These hard money loans make it easy for house flippers to fund their properties as they cover the purchase, repairs and even the listing of different real estate investments.
Home Rehab Loans are similar to fix and flip loans but only cover the estimated repairs. Home Rehab loans are used on properties that the real estate investor already owns to repair and upgrade the property. These tend to be used on rentals, to add new amenities or upgrades to make their property more appealing. They could also be used by investors who are looking to finance the repairs on a flip before putting it back on the market to make a bigger profit.
Lastly there are Bridge Loans. Bridge loans are used to fill gaps in funding for properties, and help real estate investors get the funding they need for their projects. This hard money loan is literally use to bridge the gap between fundings, and help save properties from foreclosure. Commonly it is used to help refinance loans and get the funding sorted out.
Hard money loans have many uses and how they can be used is dependent on the hard money lender, but commonly they are all pretty similar.
Lesson 3: How To Find A Hard Money Loan
Finding a flip can be very difficult for many real estate investors, most of them using wholesalers to find undervalued properties. They often have many great properties for house flippers to use.
Finding the right lender for your real estate investments can be very easy.
Like wholesalers, hard money lenders can be fund in Facebook groups, online searches, and networking events.
You should be able to find a reputable hard money lender by reading the reviews, seeing their social media pages, and talking to other real estate investors.
You should always look for highly reputable hard money lenders, with great reviews, customer service, and of course great terms and rates.
In fact a great lender will often be able to walk you through your fix and flip.
You can learn more about how to find a great hard money lenders in Arizona here.
Summary
Hard money is a great tool for real estate investors to use to get the funding they need for properties quickly and with little hassle.
Hard money can be used to start flipping, or even fill gap of funding, or help upgrade a rental.
In case you missed it, here are the 3 lessons about hard money loans:
- What is a Hard Money Loan: Hard money loans use real estate ‘after repair value’ instead of credit scores to fund the purchase, repair and sale of a property.
- How To Use A Hard Money Loan: Fix and flip loans, home rehab loans, and bridge loans are the most common hard money loans that make it easy to buy properties, make repairs, and get them ready for investing.
- How To Find A Hard Money Loan: Word of mouth, referrals, group and reviews are a great way to find the best hard money lenders.
Have You ever used hard money?
Pretty section of content. I just stumbled upon your
website and in accession capital to say that I get actually enjoyed account your weblog posts.
Any way I will be subscribing to your feeds and even I fulfillment you get right of entry to
consistently fast.
Hello There. I found your blog using msn. This is an extremely well written article.
I will be sure to bookmark it and return to read more of your useful information. Thanks
for the post. I’ll certainly comeback.
My family members all the time say that I am killing my time here at net,
however I know I am getting experience daily by
reading such pleasant articles.
Helo all, here every person is sharing such know-how, so it’s
pleasant to read this website, and I used to go to see this website daily.
Hello there! Would you mind if I share your blog with my facebook group?
There’s a lot of folks that I think would really enjoy your content.
Please let me know. Thanks
certainly like your website but you need to take
a look at the spelling on several of your posts. Several of them are rife with spelling problems and I to find it very troublesome
to tell the reality however I will certainly come again again.
I couldn’t refrain from commenting. Exceptionally well written!
If some one wishes to be updated with newest technologies afterward he must be go to see this site and
be up to date every day.
There are no limits on who may purchase a dedicated server, so
you can run a gaming server, host a website, backup your data, construct a VPN server, create virtual machines, operate a private
mail server, etc.
Touche. Great arguments. Keep up the good spirit.
Hi there to all, how is all, I think every one is getting more from this web page, and your views are fastidious
in favor of new people.
Actually when someone doesn’t be aware of then its up to other people that they will
assist, so here it takes place.
My spouse and I absolutely love your blog and
find the majority of your post’s to be precisely what
I’m looking for. Would you offer guest writers to write content available for you?
I wouldn’t mind composing a post or elaborating on some of the subjects you write concerning here.
Again, awesome blog!
Hi there, just became aware of your blog through Google, and found that it is truly informative.
I’m going to watch out for brussels. I’ll appreciate
if you continue this in future. Numerous people
will be benefited from your writing. Cheers!
Nice post. I learn something totally new and challenging on blogs
I stumbleupon every day. It will always be useful to
read through articles from other writers and practice a little something from other websites.
Wow, awesome blog layout! How long have you been blogging for?
you made blogging look easy. The overall look of your site is excellent, let alone the content!
Hi there, this weekend is good for me, since this
moment i am reading this great informative piece of writing here at my house.
Hi friends, pleasant post and fastidious urging commented
here, I am genuinely enjoying by these.
What a stuff of un-ambiguity and preserveness of valuable know-how about unexpected emotions.
Amazing! Its really awesome article, I have got much clear idea concerning
from this paragraph.
Thank you for the good writeup. It in fact was a amusement account it.
Look advanced to far added agreeable from you! By the way, how could we communicate?
Hi there, just became alert to your blog through Google, and found that it is really informative.
I’m gonna watch out for brussels. I will be grateful if you continue
this in future. Numerous people will be benefited from your writing.
Cheers!
Woah! I’m really loving the template/theme of this website.
It’s simple, yet effective. A lot of times it’s difficult to get that “perfect balance” between superb usability and appearance.
I must say you have done a great job with this.
In addition, the blog loads extremely quick for me on Safari.
Superb Blog!
This design is spectacular! You certainly know how to keep a reader entertained.
Between your wit and your videos, I was almost moved to start my own blog (well,
almost…HaHa!) Wonderful job. I really loved what you had to say, and more than that, how you presented it.
Too cool!
It’s really very complex in this full of activity life to listen news on Television, so I simply use
internet for that reason, and take the hottest news.
Great article. I will be facing a few of these
issues as well..
It’s awesome to pay a quick visit this website and reading the views of all colleagues on the topic of
this post, while I am also zealous of getting experience.
Can I just say what a comfort to discover somebody that actually understands
what they’re discussing on the web. You actually
know how to bring a problem to light and make it
important. More people need to read this and understand this side of the story.
I can’t believe you are not more popular since you surely have the
gift.
Ahaa, its fastidious dialogue regarding this piece of writing at this place at this
website, I have read all that, so at this time me also commenting here.
Great website you have here but I was wondering if you knew of any message boards that cover the same topics discussed
in this article? I’d really like to be a part of group where
I can get suggestions from other knowledgeable individuals that
share the same interest. If you have any recommendations, please
let me know. Thanks a lot!