Tag Archive for: #bridge loan

Second Mortgage Loan Explained: Real Estate Investing Tips

How to use a second mortgage loan as a real estate investor (and where to get it!).

In real estate investing, you’re going to need some extra money every once in a while.

Getting a second mortgage on your investment properties can be a way to get this money.

Let’s go through what a second mortgage loan is, how you can use it, and why they’re an important tool.

What Is a Second Mortgage Loan?

Put simply, a second mortgage loan is a loan that’s put behind your first mortgage on your property.

If you have a mortgage and you have good equity (meaning you’re under 80% on the loan to value), you can look at a second mortgage.

Why is a second mortgage so powerful for a real estate investor?

It unlocks the equity that has you trapped.

When all of your money is tied up in your properties, second mortgage loans are a way to free it.

How Can a Real Estate Investor Use a Second Mortgage?

Once you free up your equity with a second mortgage, what can you do with it? Your second mortgages probably aren’t going to be a huge amount of money – not enough to buy an entire new property.

But here are a few common uses of a second mortgage:

  • Finishing an over-budget flip.
  • Upgrading a rental property for a new tenant, refinance, or sale.
  • Using it as a bridge loan to buy your next project before your current one is finished.
  • To pay down credit card balances to lower usage and raise their credit score for their next bank loan.

In any situation where you need quick cash for your business, second mortgages are a great option. They’re the perfect way to tap into the equity you already have to reinvest in your business.

How to Get a Second Mortgage

There are 3 main places you should look to get a second mortgage.

  1. Some local banks and credit unions offer HELOCs up to 65 or 70% on investor properties. So if you have a property that has that kind of equity, that’s your number one go-to source.
  2. Real, local hard money lenders like us who are flexible and understand real estate investing will offer second mortgage loans. We don’t fit loans into a small box – we’ll help you figure out whatever you need whether it’s a second, or even a third, mortgage.
  3. There’s something we call real private money. These are real people from your community who will lend you money. If they lend to you, they’ll get a better return on their money than they would in a bank, and typically a safer return than they’d get in other investments. 

Help with a Second Mortgage Loan

If you want help finding the right way to tap into your equity, reach out at Info@HardMoneyMike.com. We’d be glad to help. 

Wondering what other lending options you have out there as a real estate investor? Download this free resource to learn your options.

Happy Investing.

How to Save a Stalled Real Estate Project

A good deal can still create a situation with a stalled real estate project. Here’s how to save it.

One of our favorite loans is the type that fixes a stalled project.

Stalled real estate projects most often happen when:

  • You run out of money before you run out of work to do, so the house can’t get on the market.
  • A refinance on a flip doesn’t work out, but the original high-interest loan designed for the short-term loan is racking up payments.

This situation accumulates interest, taxes, and other carry costs that you were not anticipating.

We love saving these stalled real estate projects. We don’t care if our loan is in second, third, or fourth position, as long as we see the deal coming through.

Let’s go through a couple examples of times we’ve recently helped clients with stalled real estate projects.

Funding the Escrow on a Stalled Real Estate Project

For this client, we funded him money in escrow to fix up a property.

He had another lender first. It was a big, national fix-and-flip lender who had a lot of money sitting in escrow for him. But, they wouldn’t release any money until he got his other properties finished first.

This client had a lot of other properties going at once, so he didn’t have the cash flow to fund this one. He also didn’t want to sit on his new property, waiting until his lender decided to give him his cash.

After four months of fighting, he decided to get a loan through us instead. We were able to fund the whole thing. We used a lien on another property of his properties to fund the whole escrow.

Now, he’s able to get this property done and on the market in time for spring. Once he sells, the other lender will release his funds, and he’ll be able to pay us back.

Funding an Over-Budget Fix and Flip

One of the most common stalled real estate projects we see: a fix-and-flipper runs out of money.

  • The budget was too low to begin with
  • The flipper got priced out of material and labor costs.
  • An expensive surprise was found in the house that wasn’t accounted for in the original budget.

We had a client come to us recently in this exact scenario. He knew he needed an extra $20,000 to $25,000. He wasn’t completely sure which.

He’s hoping it’s only $20k, but we gave him a loan for $25k anyway. This allows him to:

  • Not piecemeal a budget (getting a couple thousand funded here, a couple thousand there, etc).
  • Finish the project faster.

Now, he won’t miss the springtime market.

Why We Do Loans on Stalled Real Estate Projects

We’re glad to help real estate investors when money for projects falls just a bit short.

Anytime you have a good project or a good loan-to-value, us lending to you makes a win-win for everyone.

Need a small loan to finish a stalled project? Reach out to us at Info@HardMoneyMike.com, and we’ll see how we can help!

Text: "Finding Hard Money Bridge Loan Lenders"

Where Do You Find a Hard Money Bridge Loan Lender?

Does every hard money lender do bridge loans? Where do you find a hard money bridge loan lender?

A lot of people use the term bridge loan interchangeably with gap funding or hard money, but a true bridge loan is slightly different. They’re shorter-term than a hard money loan, and they’re typically less expensive because of that.

Is a Bridge Loan Different from a Hard Money Loan?

A hard money loan is longer and broader than a bridge loan.

  • The average bridge loan lasts 30 to 45 days. Hard money loans can last up to a year or longer.
  • Bridge loans get you from one property to the next. Hard money focuses more on a single project.
  • Bridge loans get paid when your old property sells. Hard money loans get paid when you refinance or sell the property the loan was originally for.
  • A bridge loan is used as temporary funds to close on a house. A hard money loan can be used as a more general budget for a purchase. Many come with the option for escrows to fix up the property over time.

Typically bridge loans are used for 3 situations in real estate investing. When you:

  1. Are buying a new property and already have one listed for sale
  2. Need to cover down payment on a new property
  3. Find a great deal but your bank’s financing won’t be ready in time.

What Lender Give Bridge Loans?

To find these quick, short loans, a small local lender (like Hard Money Mike) will be your best and fastest option. Smaller hard money lenders prefer working with deals that provide good, safe returns. Bridge loans do exactly that.

A bigger hard money lender will do a bridge loan, too. But they may take up to four weeks to close, which often defeats the purpose of true bridge lending.

You can also get bridge loans from some banks. Not big, national banks, but many local banks and credit unions who work with real estate investors may do bridge loans, too. Banks usually offer the cheapest bridge loans, but can take 3 – 4 weeks or longer.

Ask around to hard money bridge loan lenders you know to learn their pricing and see if it’s worth it. You can use our free loan optimizer to find out if you can get a good deal on bridge loans near you.

Read the full article here.

Watch the video here:

Text: "3 Ways to Use Bridge Loans"

3 Ways a Hard Money Bridge Loan Makes Your Life Easier

Some lenders might talk about hard money and a bridge loan as the same – that’s okay. But it will benefit you to know the particular uses for bridge loans.

The basics of a bridge loan are that they’re used to bridge you from one project to the next. You pay the loan off when the first property sells. Using bridge loans can make your investment career smoother, faster, and more profitable.

Here are 3 ways you can use them.

1. Bridge Loans to Get from One Property to the Next

The most common use of bridge loans in the hard money space is to bridge you from one property to the next.

When you have a flipped property that’s almost complete – the work is done, it’s under contract, it’s almost sold – you might want to get started on your next project without waiting for the official close.

The problem is: How do you buy a new property without the money from selling the old one? A hard money bridge loan solves that problem.

A bridge loan allows you to use the property that’s about to be sold as collateral for a new loan for a new property. Once the first property sells, some of that money is used to pay off the bridge loan. Then you own the new property free and clear.

This way of using a bridge loan is especially useful if you have a lot of cash put into one property. You don’t have to wait to get that money back after selling to start on your next investment.

2. Bridge Loans to Cover a Down Payment on a New Property

You can use an advance of the equity on a current property as the down payment for the new property through a bridge loan.

Maybe you’re about to sell one property. And you’re able to get financing for your next one… Except you can’t cover the down payment.

In this case, you’ll probably use a bridge loan in conjunction with a hard money loan. The hard money loan covers the property cost, and the bridge loan covers the remaining down payment cost. Then that bridge loan gets paid off when you sell the old property.

3. Bridge Loans to Close Fast

Another way you could use a bridge loan is to close faster on a new property.

Maybe you plan on using more traditional financing through a bank, but the bank loan wouldn’t be ready in time. You can use a short-term bridge loan.

This loan bridges you from the closing to the refinance. A bridge lender will help you with the initial purchase. Then once your bank (or hard money) loan is completely ready – usually several weeks or a month later – that bank loan pays off the bridge loan.

Bridge Loans in the Hard Money World

Typically bridge loans are used for 3 situations in real estate investing:

  1. When you’re buying a new property and already have one listed for sale
  2. When you need to cover down payment on a new property
  3. When you find a great deal but your bank’s financing won’t be ready in time.

Read the full article here.

Watch the video here:

Text: "Bridge Loans VS Hard Money Loans"

Bridge Loan vs Hard Money Loan: What’s the Difference?

Though similar, there are differences to know in a bridge loan vs hard money loan.

Some lenders will use “bridge loan” and “hard money loan” interchangeably. After all, they are similar concepts, and lingo varies from lender to lender. But it’s important to know the actual definitions so you understand these terms if a lender uses them this way.

When to Use a Bridge Loan

A bridge loan is a very short-term loan – even shorter than the typical hard money loan. It helps you bridge the space between one project and another.

Let’s say you’re just finishing up a flip. The house is on the market, buyers are showing interest, and now you’d like to get another property bought so you can jump right in to your next flip.

Typically, you use the money from selling one property to buy the next one. But if you want to get that next property started before the current one is sold? That’s where a bridge loan comes in.

A true bridge loan covers up that gap between projects. It gives you the money to close on a new property before the first one is completely sold.

A bridge loan lets you overlap from an old project to a new one.

How is a Bridge Loan Different from a Hard Money Loan?

A hard money loan is longer and broader than a bridge loan.

  • The average bridge loan lasts 30 to 45 days. Hard money loans can last up to a year or longer.
  • Bridge loans get you from one property to the next. Hard money focuses more on a single project.
  • You pay off bridge loans when your old property sells. You pay off Hard money loans when you refinance or sell the property the loan was originally for.
  • You use a bridge loan as temporary funds to close on a house. You use a hard money loan as a more general budget for a purchase. Many come with the option for escrows to fix up the property over time.

Certain lenders do pure bridge loans, while others lump it all under “hard money.” Keep in mind as you’re learning the real estate investment game that a bridge loan vs hard money loan serves different purposes.

Read the full article here.

Watch the full video here:

Is hard money a trap

Is Hard Money a Trap? How to Set Yourself Up for Success

Have you heard that hard money loans are a trap? Here’s what you should do so it doesn’t happen to you.

It’s a big misconception: hard money is a trap.

A lot of investors think if they enter a hard money loan, they’ll never escape. Hard money gets a reputation as a death sentence for your profits.

And like all loans, credit, and other money-borrowing options, if you use it wrong… it does feel like a trap!

We want you to understand what behaviors make hard money loans unprofitable. And more importantly – how to use hard money to your advantage in your real estate investments.

Hard Money Is a Temporary Solution

Here’s where hard money naysayers go wrong: hard money loans should only be a temporary solution. They are not meant to be long-term options for investors.

If you enter a hard money loan with a long-term mindset, then you’ve already fallen into the “trap.” When you treat it like a long-term loan, you’re likely to lose a lot of your profits paying it back.

Hard money is short-term. To make the most of your loan, you have to get in and out of it fast. Here are 3 vital tips to make sure that happens.

  1. Go Into the Loan with a Plan to Exit

    Never walk into a hard money loan with no plan to get out. This plan will look different depending on your end-goal for your property.

    If you’re doing a fix-and-flip, make sure to have the bulk of your construction work scheduled before setting up the hard money loan. You’ll need to get the work done and sell as soon as possible before the loan begins to eat into your profits.

    If you’re fixing and holding (renting), make sure to line up a long-term loan alongside your hard money loan. Start the refinance process before you’ve completed the rehab of your property. The longer you have to wait for refinancing, the longer it takes to pay back your hard money loan (and the less profit you’ll get from your work).

    The wrong lender might take advantage of your lack of knowledge and preparation. But if you work with the right lender, like Hard Money Mike, you’ll get personalized help to make a plan, set up the right long-term loan, and get out with your profit.

  2. Focus on Your Credit Score

    It’s important to get a good refinance loan to help you pay off your hard-money loan when the project is over. To make sure you’ll get that good loan set up on time, you’ll need to have a good credit score.

    With a score above 670, you’ll have an easier time getting a good loan from a financial institution. If your credit score is below 640, don’t even take out a hard money loan until you raise your score. No lenders can help you refinance with a score that low.

    If you need tips on raising your score quickly, check out this post.

  3. Don’t Delay Construction

    This is where many investors go wrong.

    They close the deal with a hard money loan. Then they… don’t start work. Or, they start, but hit road bumps they didn’t predict that cause major delays.

    Plan the rehab of your project beforehand. Get your equipment, permits, and contractors in place as soon as possible. Have everything scheduled. Look for problem areas in advance.

    The faster the work is done, the faster you can sell or rent. Which means the faster you can get out of your hard money loan, and the more money you make from your investment.

Want More Guidance for Your Hard Money Loans?

Hard money is a valuable tool for prepared real estate investors who use it appropriately as a short-term solution.

Let Hard Money Mike give you guidance to get in and get out of your investments quickly and profitably. We’re excited to set you on a path that makes you the kind of money you need to live the life you want.

Need to see if you’re paying too much for hard money? Download our HMM Loan Optimizer to quickly find the best hard money option for your project.

You can also check out these videos about hard money on our Youtube channel.

Happy investing.

Bridge Loans

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