You've been wanting to work with hard money lenders ever since found out they fund fix and flip loans. But as you thought about it more you realized you don't know much about hard money lenders, or hard money as a whole.
If this describes you, don't worry. To someone who's just starting out with hard money, the business can seem complicated when it's actually pretty simple.
Below we're going to cover the basics of hard money and hard money lenders.
Hard money lenders work with many properties.
In basic terms, hard money loans are short-term loans used in real estate deals. They are often funded by hard money lenders (also called private lenders).
Hard money lenders typically offer loans that last 1-3 years. Usually, a borrower like yourself would only make payments on the interest of the loan. You'd pay off the full amount later on, usually when the property is sold.
The amount of hard money lenders lend is based on the current value of the property.
Hard money lenders work with many property types. Like:
If this is your first venture into hard money loans it's advised to stick with one property type. For example, say you find a great single family home. The area is nice, the house has loads of potential, and you've used rent reports like this one. But while finalizing this fix and flip deal, you spot a run-down corner store.
"Hey! I remember this store!" you think. "It was really making bank back in the day. I bet I could get it going again in no time!"
Believe us, we understand this feeling. You might feel so empowered by one type of project that you feel like you can take on all kinds. But if you're still new to the business we think it's best to wait. Why?
Be sure you've got a handle on one property type before moving on to the next.
Working with single-family houses is different than stores. If you don't have your residential flipping process down to a T and problems arise, could you spare the time to fix it?
For instance, say you take on both the single-family house and the store.
Everything is going great until the mold is discovered. Entire rooms of the house have to be completely redone because of it. What was once a smooth sailing project is now going through rough waters.
Could you take time away from flipping the store to handle this? Or would you be willing to pull 16 hours day to handle it all?
We're not saying you can't do this in the future. We're just suggesting that you wait until you master one property type first. Once you've got that process down you can move on to the next.
Hard money lenders fund loans like:
It's important to note that some hard money lenders may specialize in one type of loan. Be sure a hard money lender funds the type of loan you want before considering them.
Suppose you found the perfect house. It has hardwood floors, high ceilings, and all the makings of a good fix and flip. Now comes the big question: Where do you go for lending?
Now if this wasn't a fix and flip but rather a home you planned to live in, going to a bank might be fine for you. But since this a fix and flip, we suggest going to hard money lenders.
There are a few reasons for this:
If you’re interested in hard money lenders and want to know more, look no further than Gauntlet Funding.
Gauntlet Funding offers the most competitive rates in the market for prime borrowers with no prepayment penalties. We are an organized and transparent system that will get you funded in little time after you have undergone the approval process! Contact Gauntlet Funding today at (631) 465-2161.
2019 Hard Money Guide for Real Estate Investors | Gauntlet Funding-Melville, NY