Hard money lenders are gaining more and more popularity for home flippers around the country. They are becoming easier to find and much more responsive to their partners than banks or other institutions. While they may have a slightly higher interest rate, they provide much more value and help house flippers complete deals in a much shorter timeframe than traditional lenders. There are a few reasons why hard money lenders are the preferred choice.
One thing that banks are not known for is their speed. Getting a loan on a property in an up and coming neighborhood or in need of significant repairs can take weeks or months. In contrast, a hard money lender can often underwrite the property in a few days and make a decision. This difference in speed is worth its value in gold.
Hard money lenders are extremely flexible in the way they structure their terms. Sometimes they accept their fee in a percentage of the sales price on the home. Sometimes they can delay interest payments or take them in different intervals. A bank will never be so flexible.
Hard money lenders are opportunity based lenders and not nailed down to any specific geography. In contrast, banks have a mandate to serve a specific geography. If it is outside certain zip codes or counties, they simply cannot issue the loan no matter how good the deal is. Most hard money lenders will go wherever they feel they have the opportunity to make a profit.
Banks and institutions have standard lengths for loans including five year, ten year and twenty year loans. Hard money lenders offer loans from as short as six months to one year that are much more suited for a flipping project.
Lastly, the knowledge of a hard money lender is much greater than the typical bank branch manager or mortgage officer. Those bank lenders simply put your information including credit score, income, house value and house location into a program. The software then eventually produces an approval or decline of mortgage. The manager does not learn anything about the plans for the home investment and also generally knows nothing about the flipping process. They don't understand contractor upgrades and the resale value of a home. A hard money lender has in-depth knowledge of the contracting process that is required for a flipping project and also understands the effect on the resale value of the home.
Trust Deed Capital is a leading hard money lender specializing in both flipping and buy and hold strategies. For more information, please contact us.