Experts say real estate purchases are expected to increase in 2018, which means now is a great time to start flipping houses or to increase the number of flips you are doing.

House flipping is the process of buying a home in fair to poor condition, renovating it, and putting it back on the market. It’s an investment of time and money to get a decent (or sometimes great) return in a short amount of time.

Many flippers entering the market use hard money real estate loans to make this process easier.

Keep reading to find out what these loans are and how they can help start or improve your house flipping business.

What Are Hard Money Real Estate Loans?

A hard money real estate loan is just like any other real estate loan, but with different requirements and different benefits

Typically, the home being purchased is the security for the loan. But hard money lenders will sometimes allow you to use additional real estate as collateral in order to get the amount you need when there isn’t enough value in the property you are buying.

Hard money real estate loans give lenders access to equity should you fall short of paying back what you borrowed.

Speaking of borrowing, here’s why this loan is your best bet to enter the real estate market.

Benefits of Borrowing

The most common problems of dealing with conventional sources of lending are as follows:

  1. Credit requirements
  2. Proof of Income
  3. Property Condition
  4. Lack of Speed

Traditional home loans run on credit, proof of income and the property being in good condition. Bankers and investment groups will check your current score and history as well as your proof of income to decide if they think you’re willing and able to meet payback requirements.

But, not everyone has a credit history – or good history – to show. The same goes for proof of income. And, if you are flipping a property, chances are that it will not be in good enough condition for a bank to lend on it.

If any of these issues apply to you, hard money real estate loans can help you out. Here is some more information on how each of these points can affect your ability to get a loan.

1. Credit Requirements

Traditional lenders require that you meet their credit requirements. While most people think of credit scores, that is only part of the equation.

Banks will also read your credit report for any other reason to disqualify you from getting a loan. If they find late payments, tax liens, bankruptcy, foreclosures, etc., they are unlikely to lend you money.

Hard money lenders look at things differently. If there are credit issues, it is more common to get an explanation of what happened and how it is different now.

2. Proof Of Income

Pretty much any time you go to a bank for a loan, they are going to ask for proof of income. If you are self-employed, this means providing income taxes. And if you are like most self-employed people, your write-offs reduce your taxable income to the point where the bank won’t lend to you.

With hard money, proof of income is typically not required. This is especially helpful when you are just getting started in house flipping and have no proof that you can carry the payment on the project.

3. Property Condition

When flipping properties, you will normally find homes that are not in great condition which is what makes them good for flipping. A property that needs repairs is essential to making profits.

However, banks don’t like homes that are not in good condition, regardless of the potential profits once it has been rehabbed.

Hard money lenders don’t worry so much about the condition of the property because they understand what is being done with the property and that it will increase in value as the work is done. Because of this, they are more flexible than the banks.

4. Lack of Speed

In real estate and in the world of house flipping, speed is important. Going to a bank can take so long that it can cause unnecessary delays in the project or kill it completely.

Banks can take weeks to make a single decision and there is no guarantee that they will make the decision to do the loan even after the delay. Any little problem they see can increase the amount of time it takes them to say yes or no.

With hard money, a loan for a fix and flip can be done in 2 weeks or less. This allows you to get the project started and completed more quickly. When you get it done and sold faster, you can do the next one sooner which allows you to make more profits.

Pre-Qualify for Your Loan

It’s one thing to understand what a hard money loan can do for you. It’s another to make the decision to apply and start flipping houses!

The process is much easier than you think and can open doors you can’t even imagine.

Click here to get started.