If you’re interested in becoming a real estate investor, you need to decide on the best way to get the money for fixing up real estate. Investors typically work with private money lenders. These lenders work very differently from conventional lenders. They offer hard money loans, which usually have a shorter term for the loans, as well as higher interest rates. The process to approve loans from private money lenders is usually much less complicated than a conventional loan, too. Instead of having to provide all your own financial documentation, you provide information about the property you want to flip. The investor will give the lender the property’s address, the construction costs necessary to get it to resale, and the purchase price. The lender then does some number crunching and gets back to the investor about how much they can expect in a loan.
There are certain trade offs in the calculation. While someone with a low credit score can still get a hard money loan, they may have to put more money down or else put up collateral or get a co-signer. Someone who has a longer track record of successful deals will have to put down less money.
Get Good Deals on Hard Money Loans by Estimating Costs Accurately
In order to build up a portfolio of successful real estate flips, you need to get a good sense of how much it will actually cost to refurbish the property. Real estate investors get into trouble when they underestimate how long the rehab will take and how much money it will cost. Many people who have many years’ experience in investing will always build in both more time and more money to their calculations. This is because you never really know what is in the house until you start work.
The second recommendation experienced investors make is to get a really good contractor. You need someone trustworthy who is accustomed to the way a rehab works. You also need to be very clear about your expectations of how long the work will take, how it will be paid for, and what to do when the unexpected happens.
Get in touch with LendingXpress to speak with one of our loan officers. They’ll walk you through the process and help you decide on the right structure for your capital needs.