If you’re new to the world of home building or flipping, you might have heard the term hard money loan tossed around a bit. But what does that really mean? And how does it differ from a traditional loan?
If you’re interested in understanding what a hard money loan is and how it could help you when it comes to purchasing and repairing properties, read on!
Just what is a hard money loan?
A hard money loan is sometimes called a private, bridge, or construction loan. It’s aimed at the individual or corporation that wants to make new builds or flips a full-time career but cannot (or does not wish to) access bank financing.
Bank financing can take up to a month to process and typically only gives you enough capital to secure the property, not to make repairs and renovations.
Hard money gives you the financing you need to repair the property, by way of draws throughout the building/flipping process. Rather than just giving you the money you need to cover the purchase cost, a hard money loan is based on the ARV (after repair value) of the property you’re purchasing.
This means that the loan amount isn’t based on what the property is worth NOW, but rather, what it will be worth after all your hard work!
This means less hassle and out-of-pocket costs for you. You have the amount of money you need to see your project through quickly. Giving you the ability to do more at one time – rather than piecing renovations together slowly when you can afford it.
So, why should you choose a hard money loan?
Many people prefer hard money over traditional lending for a variety of reasons.
One of the biggest is the speed hard lenders provide. In this business time really is money. The faster you can close on a loan, the quicker you can get your construction or flipping process going, the better.
If you have a hard money loan, you can have your funds in as soon as a week, giving you a competitive edge when it comes to closing on a property. It’s basically like cash-in-hand at the closing table. You can offer sellers more, sooner than the other guys, helping you secure the properties you want to work on.
You also don’t have to wait long between draws. This lets you pay your vendors quickly for the work they provide, and it helps your entire project go more smoothly.
Faster draws ultimately mean less time spent on a project. This means you get your money more quickly, AND you pay less for it with fewer monthly interest payments.
What does that mean for you?
Spending less of your own money up front during purchasing means you can move more quickly through repairs and building. Which means you are able to invest more time in your projects. Hard money gives you the ability to more projects at one time, saving you time and earning you more capital.
Because your funds aren’t limited to what’s in your own bank account, you can take on more and get more done. You can grow your business and make more money!
It’s a win-win.
How can we help?
If you think a hard money loan might be right for you, please don’t hesitate to reach out to us! We specialize in quick, short-term loans which means you spend less time (and money) when repaying your loans. This, ultimately, means more money for you!
Hard money fills in the gaps, where traditional bank financing falls short. We can do more for you, in less time.
In short, hard money loans help you to:
- Purchase properties more quickly
- Make repairs faster
- Shorten your loan time
- And sell your property easily!
If that sounds good to you, give us a call or shoot us an email today!