Fixing and flipping property is a great opportunity to make money in an exciting, fulfilling venture. But you need to follow some basic rules to make that venture successful, otherwise, you’ll see your investment flop. Follow these simple guidelines to make the most of your fix and flip investment property.
1. Know How Much You Can Afford
Flipping property isn’t an inexpensive gig. It requires a lot of capital, and knowing how much you can afford for property and repairs is critical to a successful fix and flip. You may also want to start looking at financing options at this point because some financing solutions, like a private mortgage, won’t cover the full value of the property you want to invest in. It can seem like a chicken and the egg situation; you need to know how much money you have to spend but you also need to know what your options are. Contact a hard money lender to find out what your options are and how they can help you make a decision.
2. Find A Financing Solution
There are several different financing solutions available to fix and flip a property, but which one is right for you will depend on what you need and what you’re trying to do. The most common types of financing solutions include:
If you’re looking to purchase a piece of real estate but need a loan to do so, you might have some questions about which financial route you should take. After all, there’s not just one kind of loan to choose from. Better yet, each kind of loan has its own pros and cons.
The main two loan categories to consider are hard money loans and private loans. They have the same purpose, but they work in different ways, making them useful in a variety of situations.
What Is a Hard Money Loan?
Hard loans come from loan companies that have set terms for their loans, making it somewhat like a bank. There are criteria you must meet and rules you must follow in order to obtain and successfully pay back these types of loans. However, they may not always be as strict with their criteria as a bank would be.
These loans are generally short term and are usually paid back within 24 months. They’re also only available for non-owner occupied properties which makes it a popular option among home flippers. They are based more on property assets than credit history, which can be useful for someone who has been turned down by a bank due to poor credit in the past.
What are Private Loans?
Private loans are another flexible option for loan-seekers. This is because they come from a private citizen or company rather than a bank. In this case, you don’t have to follow the strict rules set by banks or loan companies. It could come from a friend, someone in your family, or just someone in your community who wants to invest in your project. There may be more room for negotiation in this situation and it’s ideal for someone with low credit or who might need a little wiggle room with their payments in the future. However, it also depends on finding a private loaner who is willing to back you.
Which Should You Choose?
There really isn’t a single answer to this question. Realistically, you could go either way assuming that both options are available to you. Not everyone has the option for private money loans and may need to rely on a hard money loan company for help. Both choices can help to avoid a bank if you are struggling with your credit, although a private loan might offer you more flexibility. The best thing you can do is look at what options are available to you and find out what will be easier to manage with your financial situation.
For more information on private loans and hard money loans, rely on GW Private Capital.
Across America in 2017, only 40% of business owners applied for a loan. This number is down from the previous year when an estimated 45% applied for a loan. This information from the Federal Reserve shows that fewer are applying for the loans their company needs, however, loan programs have proven to be a good option for many. Private money lenders and hard money lenders in Los Angeles and beyond work each day to help American investors and business leaders choose loan options that are right for them.
Here are some of the most common forms of loans and why your business can benefit from private money lenders.
The Types of Real Estate Loans
Hard money loans and private money loans are the primary types of real estate loans you can choose among. Neither of these two forms is directly associated with loan programs provided by the bank and other mainstream sources. Rather, you need to work with a quality private capital service provider to receive a loan that works for you. They’re known as real estate loans because the loan provider relies on a piece of real estate or other property to serve as collateral should you be unable to pay back the loan. More often than not, the loan is used to purchase a piece of property in the first place, making it a savvy investment for house flippers and other real estate investors.
However, these two types of loans are quite different. As a savvy investor, it is important to be informed regarding the types of lenders available in the California area before making the right decision for your business.
Hard Money Loans
Investors for real estate often use hard money loans when time or other reasons disallow other forms of loans to happen. More often than not, a bank or credit union requests long-term payments over the course of a few years. Hard money loans, on the other hand, are designed to be paid back quickly.
This type of loan is favorable for many business owners since they’re often a lot less strict regarding credit history. Because they don’t rely on stringent loan standards, like banks, hard money loans rely on the loan being paid back quickly, typically between six and 24 months. For house flippers, this often the length of the entire project, from purchase to selling the fixed-up abode. These types of loans are interest based and often deal with properties that are non-owner occupied.
Private Money Loans
Private money lenders for real estate is another form of loan program you can choose from. These type of loans come from a private investor. Having a strong investor network is crucial when it comes to private money lenders for real estate because unlike hard money loans, this type has a lot to do with making strong and trusted connections. In order to achieve this loan, it is good to make bonds with people that are both in and out of the industry dealing with real estate. The reason for this is simple: investors. After all, there a number of people who don’t want to put in the hard work but may be interested in investing in your project. Private money lenders for real estate may seem difficult to find, but with the right methods of connecting with others, it could be as easy as knowing a neighbor or friend who wants to jump into the world of private money lenders. Relying on accredited investors and hard money lenders, however, assures a business owner that they’re able to achieve their goals by a reliable third party.
When you feel private money lenders for real estate or hard money loans are right for you, it is important to know as much as you can regarding these types of loans. For more information, rely on the experts at GW Private Capital today.