Flipping real estate has become a very popular and profitable business. Thankfully, there are alternatives to bank loans, that allow real estate investors to purchase properties quickly and easily. One of the most popular options is a private money loan, also known as a hard money loan.
Check out these quick facts about how a hard money loan can be a good alternative for your next house flipping project:
What Is a Private “Hard Money” Loan?
Private money loans are different from a bank loan because you typically don’t need to have a minimal FICO credit score and income documentation requirements are much less stringent. Your asset is the primary collateral and one of the most important factors to a private lender when a loan decision is being made.
What Are the Benefits?
Quicker approvals: A private loan application does not take as long to approve. You can typically get approved within hours or a few days.
Easy to obtain: Private money loans are based primarily on the property and not on credit, income and other factors looked at by banks and traditional lenders. If you find a good deal, a dependable and seasoned private money lender like GW Private Capital can arrange a loan for you quickly and without a lot of hassle!
Loans close faster: Private money loans can be funded and closed within weeks and sometimes within days.
Private money loans allow for high leverage: Some private money lenders, like GW Private Capital, can lend up to 100% of the purchase price. Banks and traditional lenders will usually require a significant down payment.
What Are the Drawbacks?
Private money loans are usually used for a short term borrowing period lasting no longer than three to twelve months. As such, the interest rates are higher than traditional or bank mortgages. In most cases, this is no problem for a house flipper since the return on investment is found quickly.
A private money loan is an easy alternative to a bank loan for several reasons. The condition of the property is not a factor, the borrower’s credit will history will not disqualify you. Private money lenders can help you quickly get your project funded, so it is a perfect option for someone looking to break into the real estate flip business.