If you’ve recently started investing in real estate, then you’re finding out how difficult it can be. You may also be realizing how much money can be made. Real estate is one of the strongest investments you can make, and as long as you put in the necessary thought, it comes with reasonably low risk. There is a lot of work involved, and numerous problems to overcome. One of the biggest problems when it comes to buying real estate, especially fix-and-flip investment properties, is finding the funding necessary to pay for the property in addition to necessary repairs. Luckily, there is a solution for this type of problem exactly. Here are a few benefits of obtaining a private money loan for your investment property.
Easy
If you attempt to get a traditional loan through a bank, you’ll immediately start to notice red tape and restrictions everywhere. It will require a small mountain of paperwork, and at least several meetings with a representative from the bank. After jumping through all of the hoops, if you’re lucky you’ll be granted the opportunity to jump through more hoops in exchange for receiving a loan with even more restrictions. This is not a pleasant experience. One of the biggest benefits of a private money loan is that they are generally very simple to get. They allow you to avoid a lot of the paperwork, and also don’t have very much red tape. Since these loans generally come from private lenders, the representative you talk to is likely to have the ability to be much more flexible than the representative from the bank as well.
Fast
For many of the same reasons, a private money loan can be obtained in a much shorter time period than a traditional loan. This is a benefit because, once you pick out a property that you want, it’s inconvenient to wait for a traditional loan to come through. It’s annoying for you, but it may also be just frustrating enough for the seller that they decide to sell the property to someone who can produce the funds more quickly.
Covers repairs
While a traditional loan rarely even covers the entirety of the price of the property, a private money fix/flip loan will often provide extra money on top of the purchase price. The extra funds are generally used for repairs on the house. This is a huge improvement on a traditional loan, because even if you have very little cash at all to put towards the property, you can still purchase a house, and even be able to fix it up before selling it for a profit. This makes a private money loan an almost ideal situation for any fix-and-flip investor.
Secured against the property
A private money loan is almost always secured against the property it is paying for. This means that you don’t have to come up with other collateral in order to obtain the loan. All you need to get started is a small down payment. This is helpful if you don’t yet own any other property, or if the only property you own is your primary residence and you want to protect it from foreclosure. If the worst should happen, a foreclosure would only take the purchased property.
Short-term
Often, a bank will not allow you to pay off a loan early without charging a large fee. This can leave you paying excessive amounts of interest for decades, and can also make a fix-and-flip investment unfeasible. Private money loans are generally short-term. In fact, they’re often set up to be just the right amount of time to repair and resell a property. You certainly don’t have to worry about restrictions on paying it off early.
If you are considering the purchase of an investment property to flip, and are looking for financing, contact us. We specialize in private money loans and would love to answer all of your questions.
Center Street communications are not intended to provide business, legal, tax, investment or insurance advice. No Center Street communication should be construed as a recommendation for any business or investment strategy by Center Street or any third party. You are solely responsible for determining whether any investment, investment strategy, business strategy or related transaction is appropriate for you based on your personal investment objectives, financial circumstances and risk tolerance. You should consult your legal or tax professional regarding your specific situation.