hard money loan

For fix and flip investors, getting access to quick financing is crucial to success. While a bank loan can be one way to finance a fix and flip project, bank loans often take ages to get, and the loan application process can be quite tedious. The real estate market is dynamic, and if you’re a fix and flip investor, you can’t afford to drag your feet and miss out on available properties. You need money fast. That’s where hard money loans come in.


Hard money loans don’t follow the stringent loan application processes most banks and traditional lenders use. Instead, hard money loans are provided by private money lenders who use the asset you intend to purchase as collateral for the loan. Unlike traditional bank loans, hard money loans don’t emphasize credit history, making them faster and easier to acquire. However, they have several other benefits too. If you’re a fix and flip investor, here are more reasons why you should consider getting a hard money loan instead of a traditional bank loan to fund your project:

1. Loan to Value Ratio


Private money lenders usually determine how much they can offer you using the loan to value (LTV) ratio. For example, say you want to purchase a property that is worth $400,000. You apply for a loan of $280,000. Thus, the loan to value ratio is 70%. Generally, hard money loan-to-value ratios hover at around 60-70% of the collateral’s value. Hard money lenders tend to use a conservative loan to value ratio. Thus, they are more willing to lend to people with poor credit. On the other hand, banks may accept loan-to-value ratios as high as 97%. As a result, they are far more selective about who they can extend loans to.

2. Loan Eligibility


Typically, applying for a hard money loan isn’t as time-consuming as applying for a bank loan. To acquire a hard money loan, you’ll require a sound business plan. What’s more, if you’re a seasoned fix and flip investor and you’ve worked on several successful projects, you can use them to show you are a savvy investor and get funding.

3. Property Limits


Fannie Mae allows banks only to finance a maximum of ten properties per lender. However, most banks won’t even provide financing for more than four properties. If you’ve been turned away from your bank because you need funding to finance multiple projects, hard money loans can offer a solution. Hard money loans don’t place a limit on the number of properties you can finance. With a hard money loan, you can get financing for several ongoing projects.


If you’re a fix and flip investor, a hard money loan can be a viable alternative to a conventional bank loan, especially if you intend to renovate and sell the property quickly and you have a less-than-perfect credit score.


If you’re interested in getting a hard money loan for your next fix and flip project, get in touch with us today to learn more about how private money loans can help you build your portfolio.