Investing in real estate and flipping properties can be a great way to earn a significant income. When you are looking for properties to purchase, one of the biggest decisions you will have to make is how to obtain financing to make the purchase. When you are looking for financing for your investment property, there are many different options to choose from. While many people choose to go to a traditional bank, there are several advantages that come with getting a loan from a private money lender.
Easier Underwriting and Qualifications
One reason why you should consider getting a loan from a private money lender is that the underwriting process is easier and the qualifications are not as significant. When you get a loan from a traditional bank, you will likely have to spend a significant amount of time providing the lender with bank statements, income verification statements, and a variety of other reports. The bank will then spend a considerable amount of time reviewing all of this information and asking you plenty of questions while they go through their underwriting process. This can be a very stressful time and could lead to a loan denial if you do not meet all of the parameters.
While a private money lender will request some information from you to determine whether they want to provide the loan, they will be focused more on your business plan and experience than your current financial position. Furthermore, they are not subject to the same rigid approval standard and are more likely to be able to provide you with the loan.
Another advantage for getting a loan from a private money lender is that it is a much quicker process. When applying for a loan from a traditional bank, the process from initial application to loan funding is upwards of 60 days in length. For those that are looking to buy a deal at a discount to flip, this can make it impossible to react quick enough to win the best opportunities. On the other hand, when you take out a loan from a private money lender the process is much quicker. Private money lenders typically need only a few days to review the loan proposal and provide you with the capital necessary to finance the purchase. This can help you to make a much more attractive qualifying bid when looking to buy an investment property.
When you are looking to purchase a property as an investment to renovate and flip there is always a good chance that you could incur higher costs than you originally expected. If you took out a loan from a traditional bank, there would not be much that you could do to get more money from the bank. However, private money lenders are more knowledgeable about real estate investments and understand how costs can increase higher than expected. The private money lenders will likely be willing to work with you to find a solution that will provide you with the capital necessary to complete the project.
Finally, private money lenders are very experienced with house flipping projects and could provide you with valuable insights into your business plan. They will be able to provide you with additional ideas that could allow you to earn a greater return on investment or help you identify project risks that you were not previously considering.
If you are considering investing in real estate and want to flip a home or have been in the business for some time, contact us to learn more about how we can help you and ensure you are able to earn a great return on your investment.