If you are getting started with flipping houses, you are going to need to find ways to secure your financing to purchase the houses. However, this is not something you get from a traditional mortgage, since you are buying properties that need work with plans to not hold onto them for that long. This is where hard money lenders come into play, since they are a great way to get the cash you need to make a profit. Here is what you should know about using hard money lenders.
Hard Money Lenders Focus On The Deal
When you get a traditional mortgage, the lender is more focused on you as the individual. They ask themselves if you are capable of paying back the loan, what your income is, what kind of credit score you have, and how risky they think you are as an individual. If they trust you as a borrower, they'll give you the loan.
What makes hard money lending so different is that the lender is focused on the deal you are trying to make. Getting money from a hard money lender is less about your personal history and credit score. If they think that the home you are trying to flip is going to be a good deal and make a profit, they're likely to lend to you. For example, they'll look at the price of the home you are trying to buy, the amount of money you feel needs to be put into it, and what that potential profit can be in the end. If it seems like a practical flip with what you are trying to do, you'll get the money that you need to do the job.
Hard Money Lenders Are Regulated
Be aware that there are federal regulations in place for hard money lenders. The lender typically works by pooling resources from various investors that are looking to make a return on their investment, and they do this by lending money to people like you that can flip homes and make a profit. However, this is not the same as dealing with individuals directly for a private loan.
Any hard money lender you work with must be registered with your state and abide by all of the rules and regulations set forth for lending money to people like you. This can help give some legitimacy to the organization you are working with and may help you know that they are going to be a trusted partner that you can work with.
For more information, speak to a hard money lender.