Private Mortgage Lenders – Why Fast Funding Is Important When Flipping Homes
If you’re thinking about purchasing a property that needs some work, either to fix and flip or to rent out to tenants, then you have probably already thought about what kind of home you want to buy and what repairs you need to make to the property. But, have you thought about how to pay for it all? Obtaining fast funding from a private money lender could very well be your best option. Here are just a few reasons why.
Traditional funding is difficult to obtain.
Typically, traditional lenders will want you to have collateral just in case you default on the loan. Even though you definitely don’t have any intentions of doing so, your lender will still want something that can easily be sold to make up for any money loss in the event of a default. However, rehab properties typically aren’t in good enough shape to satisfy traditional lenders, like banks. If you do get qualified for a loan, you might have a difficult time getting the money to repair the property in addition to the the cost of purchasing it. Private money lenders that specialise in real estate, though, are another story. They understand fix and flip projects and will loan you the amount you need to purchase the property as well as fix it up.
Rehab properties sell quickly.
People look for fixer-upper properties for many reasons. Some do so that they can make repairs and then sell it for a profit. Landlords will specifically look for older properties that need some work, then turn them into rentals. People are also looking to purchase a home to live in, don’t want to spend too much money, and don’t mind having to put in the extra work. Having all of these different kinds of people looking for rehab properties means that if a good deal comes along, it might not last for very long. If you’re struggling to find funding, or trying to go through a bank loan process, you might miss out on the opportunity to purchase the property. Hard money lenders work much faster and have easier application processes than traditional lenders, getting you your loan in enough time to close your deal.
Repairing the property might be more costly than you think.
Repairs can be more expensive than you expect them to be. Doing the bulk of the repairs yourself can definitely save money, but if you run into an electrical problem (and if you’re not an electrician) you’re going to have to hire a professional. Like I said above, when you borrow from private lenders that have experience in real estate lending, your loan will include the amount you determine you need for repairs. It’s important to account for any possible problems that might come up to avoid having to pay out of pocket.