House flipping has grown in popularity in the last few years as people look for innovative ways to make money. If you have a great interest in being a house flipper, you do not have to use your own cash reserves. Take advantage of asset-based lending from highly reputable hard money lenders to help you maintain liquidity and increase your cash flow.
Many people are against taking loans as they fear the loan interest, points, and fees into the house flipping project. However, there is a notable difference between taking hard money loans and loans from traditional banks, both in the process and returns.
Explained below are why hard money loans like Asset Based Lending are the best for house flipping investors and why they should be your first choice.
Faster to process
Time is a crucial factor in house flipping. The best way to profit from flipping houses is by quickly purchasing property, timely renovations, and a fast resell. This allows you to focus on more properties up for auction.
Financing house flipping is more complex if you depend on conventional bank loans. They generally take more than a month to get approved, and the amount received is often insufficient for comprehensive renovations. The best way to get finances is through hard money loans.
Hard money lenders are faster and more flexible. You can expect to receive a loan within less than ten days. The lenders are flexible enough to provide a loan when the deal is urgent and has sufficient evidence of great after-value.
Shorter loan terms than a traditional mortgage
Traditional mortgage loans have loan term payment periods of more than 15 years. As for hard money loans, you should expect short-term payments of less than two years. The lenders don’t charge penalty fees when you get a chance to pay your loan earlier than agreed.
Additionally, it is easier to ask hard money lenders for payment extension if the property takes longer than expected to sell. However, not all money lenders are comfortable giving extensions to their qualified borrowers; hence it is crucial to ask before taking the loan.
Do not require excellent credit.
It is a protocol for banks to run a microscopic check on your credit history and financial background. This prolongs the approval process and may result in a denied loan request if the bank is not satisfied with your creditworthiness.
Hard money loans are a perfect choice as the lenders are less concerned with your credit score. Your property is collateral for them. You may qualify for a higher loan amount with proven creditworthiness.
Holding a significant equity position in the property of interest or having several successful flips are aspects that qualify you for hard money loans despite having a lower credit score than the preferred minimum.
Better qualifying rules
Traditional banks require more paperwork than hard money lenders. The process takes longer before the loan is approved, and any red flags in your financial history may disqualify you from loan approval. If you wait for funding from the bank, you’ll more likely miss out on the opportunity to purchase the desired property.
Hard money loans have more relaxed qualifying rules. Fewer documents are required, and the most significant qualifying factor is your skill to flip houses and your track record with successful flips.
Less strict on property condition
Getting a loan from a conventional bank is often accompanied by strict requirements regarding the property’s condition. Typically, the bank offers an amount equivalent to the property as-is value, which may limit the repairs you expect to do for you to sell the property at a higher cost.
Hard money loans are perfect as the property’s current condition is irrelevant if the after-repair value justifies the loan amount. The hard money lender will not be scared of a property in poor condition because that is the main reason for the loan. However, the condition in itself is not a significant disqualifying factor.
House flipping is an excellent business as it goes hand in hand with the ever-growing housing market. Do not miss this investment opportunity when you have the perfect choice explained above to source the funds for house flipping.