A hard money loan may not be the ideal loan, but it is still a viable option for house-flipping!
Sometimes, the ideal loan is just not within your reach. That does not mean, however, that all is lost or that you need to give up on your investment dream, whatever it may be. There are still options for you, even if it seems you have been turned down every way that you have turned. Often, the key is just not to give up and to expect that things are going to work out for you sooner or later. When it comes time to work with a hard money lender, however, there are a few critical steps that you need to follow to ensure that you set yourself up for long-term success.
First and foremost, find a loan or a combination of loans that covers all your expenses, not just the price of the property that you are looking to purchase. This includes the cost of making any necessary repairs to your investment property and of processing the sale of the property once it comes time to do so.
Second, try to get at least the majority of your funding (65-70%) from a single hard money loan if that is the route you are going. Even at 70%, you are leaving yourself with a significant gap to fill, and if you are using a hard money loan, then you already know that your options are limited. Maybe you can snag another credit line, or maybe you will need to get a second hard money loan. The more you can get from the initial loan, the better off you will be.
Third – and perhaps most importantly – is the hard money lender that you choose to work with. Your focus should be on selecting a hard money lender who is experienced at home investments. You are looking for a hard money lender who has done house-flipping in the past, someone you can count on to understand what it is that you are doing so that you can operate smoothly and effectively through the (not exactly perfect) hard money loan situation.
A hard money loan may not be your first option, but if you play your cards right in your house-flipping career, it is a viable option nonetheless. Be smart, understand the decisions you are making, and stay aware at all times!
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