Hard Money loans are extremely useful for real estate investors in Phoenix looking to make a profit in top real estate markets. Hard money loans make it easy to invest in real estate opportunities and fx and flip them for profit or even upgrade rental properties. If you have ever wanted to learn more about real estate investing, learning about hard money loans is a great place to start.
What Is A Hard Money Loan
Hard money loans are asset-based loans, used primarily for real estate. Instead of going through traditional lenders where the loan is determined on the borrower’s credit history, hard money lenders base the value of the loan on the properties, and after repair value after renovations are made. Hard Money loans differ from traditional mortgages and are meant to be short-term loans, with terms lasting between 6-12 months. Hard money loans are based on property value, so approval and funding are very fast, with some borrowers receiving funds within 24 hours.
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Hard Money Loan Details
Interest rates for hard money loans vary per property. Due to the short-term nature of hard money loans, interests rates are higher than traditional loans. Hard Money Loan value is determined by the property value and the after repair value. Hard Money lenders use the after repair value to determine the property worth to determine the fixed budget and be able to lend on the repairs, and not just the property. Hard Money Loan interest rates can vary anywhere between 10%-16% for the loan. Hard money loan rates are still higher than a standard 30 years mortgage loan of 5%. Traditional lenders create loan programs to create the most amount of interest over time, while hard money loans are asset based and short-term with most real estate investors flipping properties and repaying the loan in 6 months or less.
Types of Hard Money Loans
Hard money loans can be used on a variety of ways, but most fit these three categories, fix and flip home rehab, and bridge loans. Hard money lenders work primarily with real estate investors, so having these convenient loan packages in place, make lending easy.
Fix and flip loans are perfect for real estate investors who want to buy, renovate, and sell a property for a budget. This is known as ‘flipping’ a home. A fix and flip loan will cover not only the purchase price for the property but also the budgeted repairs as well.
Home rehab loans are great for real estate investors who want to repair or renovate a property in order to rent. A home rehab loan covers big budget repairs that will increase the property value and will make renting more profitable. Home Rehab loans are short-term loans to provide fast and large capital planned for large repairs to investment properties.
A bridge loan is used to fill the gap in funding on a property until it is refinanced or sold. This is great for those facing foreclosures or acquiring short sale properties easily. Bridge loans are used to close deals fast, fund repair projects, fund house flips or even rescue homes from being foreclosed. Bridge loans are approved quickly making them ideal for those looking to pounce on new opportunities in the real estate market.
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How To Apply For a Hard Money Loan
Hard money loans make becoming a real estate investor easy. In fact, many hard money lenders will work with real estate investors to help them to achieve success. Hard money lenders will even offer tips on how to get the most value for your repairs. If you are ready to apply for a hard money loan, make sure you have these 6 things:
- Property Address
- Purchase Price
- Loan Amount
- Photos of Property
- Property Plans
- A Flip Budget/Plan
These 6 things help the hard money lender learn more about the property and the real estate investors plans for it. The hard money lender will evaluate the local real estate market and compare the property to ‘comps’ or comparables in the area to see what other homes are selling for, and even what repairs have been made. This shows the lender how much homes are currently valued at, and when repairs are made how much the home will be able to sell for reasonably. They will also want to see your flip plan and budget to see what repairs you plan to make sure you have an accurate budget.
Hard Money loans make real estate investing easy. With fast access to capital, not credit history, hard money lenders make the application process hassle-free. To learn more about hard money loans, click here!
