Many people run businesses that are based on flipping homes. Flipping a home typically means tackling purchasing, renovating, and selling. However, a company that flips homes might find that they need to change how they receive financing. Many home flipping businesses across the nation are realizing the benefits of hard money loans. Here are four beneficial reasons to consider a hard money loan.
- Fast Turnaround Time
A hard money loan is often preferred for its fast turnaround time. One drawback of receiving a loan, especially for home flippers, is the turnaround time. No buyer wants to wait months to find out if they’re going to receive the money they need. A hard money loan has a much faster turnaround time, averaging about one to two weeks. A traditional loan can have a payment period spanning anywhere from one to 20 years. However, private money loans are often granted with a duration of only five years, making it a much faster option.
- Hard Money Loans are Flexible
It’s imperative that someone flipping homes continues to find properties to flip. Many borrowers find that receiving a traditional loan comes with far too many restricting regulations. If a borrower already has a certain amount of mortgages, there is a strong chance traditional banks will turn away your loan proposal. Hard money lenders are often far more flexible, especially to those who are flipping properties. Statistics show that many hard money loans are secured by property with equity ranging from 30-50%.
- Perfect Bridge Between Buying and Renting Out Property
Not all flipping businesses will flip a property to sell it. In certain cases, a flipped home can easily be rented out to tenants. Certain people will prefer receiving smaller sums of money per month, rather than a larger payout in the beginning. However, there are steps that need to be taken that involve refinancing said property. Many home flippers prefer to purchase a home with a hard money loan while renovations occur. Next, the property is refinanced to a more traditional mortgage, allowing renters to begin utilizing the home.
- Being Able to Compete at More Auctions
One area where a home flipper is often found is at an auction. A company that flips homes often visits auctions in an attempt to receive a low price on a property. Home flippers often find their most beneficial purchases at estate auctions across the nation. However, it can be tough for a company to compete in cash only auctions. The fast turnaround time of a hard money loan allows a home flipping company to receive cash in time for the next property auction.
In closing, there are several benefits to receiving a hard money loan. A company that flips homes will need to find financing options that can be completed quickly. Waiting too long to receive a loan can mean a flipper misses out on a valuable property. Flippers will find that hard money loans are often far more flexible than their traditional financing options. In addition, a hard money loan makes for a perfect bridge to refinance a property from purchasing to leasing it out to tenants. If you’re having trouble receiving a cash loan, buying certain properties can seem impossible. Hard money loans enable home flipping companies to enter property auctions they might have been able to. Hard money loans are used by many home flipping businesses in order to expand their property database.