You learn that a co-worker wants to unload a house ASAP. You see the potential to make a good profit by flipping the house. They want a reasonable amount, but you don’t have enough in savings, or strong enough credit, to swing a traditional mortgage. Nor will the other party wait the 6 weeks or more a traditional mortgage process requires. What do you do? The solution could be a hard money loan from a private lender.

What Is a Hard Money Loan?

It’s called a hard money loan because it’s secured by a hard asset: the property itself. These are non-bank loans permitting real estate investors to close on a purchase, make necessary improvements, and get the property back on the market for resale at a profit. When you have time constraints for a real estate transaction, a hard money loan is often the only means to achieve this end.

How Fast Can You Get a Hard Money Loan?

According to NewSilver, you may obtain a hard money loan in as few as 7 or 8 business days. Private lenders offer a streamlined application process. They’re looking for a good “deal” that will earn them a profit quickly. Many don’t care about your credit rating or the LTV (loan to value) of the property. They care instead about the ARV (after repair value). In return for faster access to capital, a less stringent approval process, and more flexibility in repayment schedules, the lender may charge a higher interest rate. However, you may lower the total amount of interest charged if you’re able to pay the loan off with a quick resale.

How Do You Prepare to Get a Hard Money Loan?

The key to fast access to capital through a hard money loan comes in how well you present your deal. How quickly the lender comes through with your capital depends on how well you sell the opportunity. Research your lender first. To impress a lender, present a solid remodel/rehabilitation plan with realistic cost estimates. Attach an achievable repair schedule that covers the time to finish construction and to re-list the property at a substantial profit. Look up comparable sale prices and schedules in the area. Take photos. Show designs. Remember that you’re selling your lender on this opportunity, so do your homework and arrive at a plan. Give us a call today for more information on hard money loans.