How to Get a Loan to Flip Houses
Strike while the bargains are hot and you can get a good deal on foreclosed properties to flip. The trick is having cash to buy, and if you don't have your own nest egg lying around, don't worry, there is plenty of money available if you know where to look. Forget what you may have heard about hard money lenders, they can be your connection to real estate investment success if you understand how they work and how you can benefit from their services.
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Instructions
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Interview two or three hard money lenders in your area before you begin to shop for a viable property for your next fix and flip. The term "Hard Money Loan" is often misunderstood by potential borrowers. A better term to describe the product is "Asset-Based Lending."
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Establish a working relationship with the lender you feel offers the best terms, and with whom you feel you can most easily communicate. As you do more successful deals with the lender, the terms should improve. Typically speaking, residential flip loans run up to 65 percent of loan to value (LTV), for six months to three years (some offer extensions), with 3 to 6 points and 24 to 48 hour loan processing.
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Increase your chances of submitting a winning bid on deeply discounted properties offered by banks, wholesalers, or other private parties by offering a cash deal, funded by your hard money lender, and a quick close. Because the hard money lender loans on the value of the property, not your personal credit score, you need to be sure your deal meets the lender's criteria to get the loan.
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Manage your deal by making sure you have everything in place for your lender, including your contract, property information and comparable sales if they are requested. If the lender needs to inspect the property, make sure you can arrange to have the property available.
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Make payments on time and if possible pay off your hard money loan earlier than expected. The lender will be more likely to approve the next deal you bring to them and improve the terms.
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Tips & Warnings
Move quickly once you have located a bargain property. Develop contacts that will help you quickly find bargain properties. Perform as promised and if you run into a snag, quickly communicate with your lender. Sharpen your negotiating skills to strike the best deal with your hard money lender.
Consult an attorney if you have questions over any written contract Read the fine print yourself, do not rely on anyone else pointing out disadvantageous clauses. Inspect the property thoroughly yourself or have a professional provide a written inspection prior to submitting your contract to buy. Keep costs under control. This means personally doing, or supervising, as much of the work as you can.
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- Photo Credit Image by: Keith Olsen
