Real estate investors need to know their options and hard money loans are an important one! If you want to expand your investing, consider these 4 situations where hard money loans are ideal.
The old axiom holds true: it takes money to make money! Real estate investors know this to be true. It takes money to acquire a property, fix it up, and generate a return. If you don’t have money or don’t have enough of your own money, you need another option. That’s where hard money loans might be helpful – they’re loans for real estate investors to help them invest. Here are 4 situations where hard money loans are ideal…
Top 4 Situations for Hard Money Loans
➊ Acquisition
Even a quick turn begins with buying the property. Unfortunately, this can tie up your assets and limit your scope. Borrowing can leverage you into greater success, but there are limits to traditional funding sources. Hard money loans not only provide great flexibility, but they are perfect for shorter-term loans, like a 3-month light rehab. They offer a great way to scale your business by providing the capital to buy larger properties or more than one property at a time!
➋Flips/Rehabs
There are a great many homes in need of rehabilitation. If your mission is to fix homes and resell them at a higher price, you might describe yourself as a “flipper” or a “rehabber”. As you know, this style of investing ties up a lot of capital – first to acquire the property and then to make needed repairs to the property. There are also holding costs to consider, like insurance, utilities, taxes, etc. Some investors are able to fund the entire project out of their own pocket, but is that really the best use of your money? A hard money loan allows you to cover much of your renovation costs so you can invest in multiple projects for scale.
➌ Turnkey Wholesaling
Turnkey wholesaling is a unique type of investing: these investors acquire a property, fix it, rent it, get a management team in place, and then sell the property. Since finding good property management and tenants can be the hardest challenge for many investors, turnkey solutions are increasingly popular. That can be a capital-heavy business, depending on the cost to acquire and the cost to repair. Hard money loans give you the capital to acquire and repair properties so you can start making money on them.
➍ Post-Tenant Repairs
Most tenants honor their agreements and care for the property they are renting, but there are exceptions. Buy and hold investors who focus on cash flow investors should be prepared for tenants that leave at an inconvenient time or trash the property. Without sufficient reserves, these situations can be devastating. One option to make repairs and cover other expenses is a hard money loan. Even investors with sufficient capital may want to use those assets more productively while they make repairs and get their units rented again.
Summary
If you are investing in real estate, you’ve probably already learned that you need more money than you have, regardless of your goals. Hard money loans can close that gap. They are tools used by many investors as an alternative to other lending types. If you’re an investor, You may find yourself in any of these 4 situations where hard money loans can help you achieve your goals.
