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Welcome back to another edition of Hard Money 104. I’m Chris Jamison from SF Lending, your go-to hard money lender. Today, we’re diving into when it makes sense to use hard money.
If you need to close a deal fast, hard money can be your best friend. Sellers love quick buyers. With hard money, you can promise a five to seven-day closing period, making your offer more attractive. Build a solid relationship with your lender to speed things up even more. Fill out your application, get pre-approved, and make confident offers knowing your lender has your back.
Wholesalers often need fast closures, sometimes within days or even hours. Hard money lets you keep up with their fast pace. This helps both parties: the wholesaler gets their money quickly to find new deals, and you secure property fast.
The first Tuesday of every month is auction day at courthouses. If you’re buying pre-foreclosures, get everything ready to close the Friday before the auction. This gives you some wiggle room for delays with title issues, attorney hiccups, or slow payoffs from big banks like Wells Fargo. Closing on a Friday also allows the seller time to move out, letting you start your rehab promptly.
Sometimes sellers need to close quickly due to life changes—like moving for a new job or dealing with a vacant rental. Hard money can make your offer more appealing. Structure your contract to benefit both sides, ensuring a win-win situation.
Houses with significant problems like foundation, roof, HVAC, or flooring won’t qualify for conventional loans. Hard money can help you fix these issues, allowing you to bring the house up to standard for take-out financing or resale.
Sometimes a property requires extensive repairs, costing $60,000 to $200,000 or more. If you can’t cover these costs upfront, hard money can bridge the gap. You can either close the purchase with cash and then refinance for the rehab money, or you can borrow both the purchase and rehab amounts upfront, minimizing your out-of-pocket expenses.
If you have the money for the purchase but not the rehab, you can use hard money to finance the renovations. Close with your own funds, then refinance into a hard money loan to complete the rehab.
Using hard money allows you to buy multiple properties quickly. You could potentially acquire three to four houses at once, then refinance them all together. This speeds up the process and helps you build a rental portfolio faster.
Leverage hard money to minimize your cash investment. Buy multiple properties, fix them up, and refinance them all at once. This strategy helps you manage different Debt-to-Income (DTI) ratios and get multiple properties cash-flowing faster.
Using hard money can let you flip three times as many houses as using cash alone. If you were to buy, rehab, and flip one house at a time, you’d probably do two deals a year. With hard money, you can manage six flips in the same timeframe. This spreads your risk across multiple deals and can significantly increase profits.
A hard money lender won’t let you dive into a bad deal. They conduct third-party appraisals and ensure the property is worth the investment. This added layer of security helps you avoid overpaying and reduces the risk of a bad flip.
Before committing to a hard money loan, use tools like Propelio to run comparable sales and get a realistic idea of a property’s value. This prep work ensures you’re not wasting your lender’s time and helps you prioritize solid deals.
Hard money lending offers numerous benefits for investors needing quick closings or dealing with properties requiring significant repairs. It also accelerates the growth of rental portfolios and increases the volume of house flips you can manage.
Hard money lending can be a game-changer for real estate investors, providing the speed and flexibility needed to seize lucrative opportunities. Whether you’re aiming for quick closures, working with wholesalers, navigating pre-foreclosures, or tackling extensive rehabs, hard money offers a practical solution.
It facilitates rapid portfolio growth and enhances your capacity to flip multiple houses, all while mitigating risk through diligent lender appraisals. By leveraging hard money strategically, you can maximize your investment potential and achieve your real estate goals more efficiently.
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