Tag Archive for: what is hard money

Hard Money is Scary

Hard Money is Scary

Hard Money is Scary!

So, you just found the perfect house to fix and flip, but the only way your bid will get accepted is if you can close within a week.

That means you need to team up with the much feared and misunderstood creature: Hard Money.

AHHHH!

You’ve heard many rumors of this being, like it’s a big, ol’ fat trap that’ll suck your bank account dry. But fear not! Hard money isn’t as scary as rumor has it, especially if you take three simple steps to protect yourself.

Ignore the rumors and do a little homework.

What is hard money? Really. Understanding this type of loan will save you tons of headaches in the future. Because those who have a scary run in with it do NOT use it correctly. They might treat it like a regular bank loan or accept the first hard money loan offered to them. Both spell trouble.

Understand the REAL costs and benefits.

If you only look at interest rates, then yeah, hard money is more expensive than bank loans. But bank loans come with other costs, like time, contingencies, and paperwork.

For example, if you’re competing against five other investors, you have the power to bid lower and still win. Because sellers of fixer uppers don’t want to deal with banks. Banks take too long to close and require appraisals and inspections. Therefore, cash buyers usually win even if they bid thousands of dollars lower than the next bid.

Learn the difference between hard money lenders.

Hard money lenders come in all shapes and sizes. It’s like buying new furniture. If you only go to one shop, then you get what you get. But if you go to multiple shops, then you can compare different styles, prices, and terms.

Hard money lenders are no different. If you only call one, then you get what you get. And that, again, spells trouble. You need to shop around so you can compare lenders and find out what they offer…and what they require. And if you come across a hard money lender who offers an interest rate that’s too good to be true, then be prepared to face the scary monster that you’ve heard about. Because junk fees might come spewing out of it.

Bottom line, turn on the lights. Hard money is only scary if you sit in the dark and hope for the best.

Happy investing!

Is hard money a trap

Hard Money is a Scam

Hard Money is a Scam

Many years ago, a rumor spread that hard money is a scam.

It all started with a real estate investor who could not qualify for a bank loan, so they turned to a hard money lender. Unfortunately, this real estate investor didn’t understand how hard money worked. So they had a bad experience. Like, really bad.

After that, they told ALL of their friends, “Hard money is a scam.”

And then those friends told their friends the same thing, even though they themselves had never used a hard money loan.

The rumor spread quickly. For miles and miles, investors caught wind of the false news that hard money wasn’t good for them or their wallet. One by one, they turned their back on this loan option and struggled to find another. And they lost a lot of money.

All because one investor had a bad experience. A bad experience that could’ve been prevented had they done just a little bit of homework.

Because here’s the truth. Hard money is NOT a scam.

It’s actually a genuine, honest-to-good option for investors who:

  • Can’t qualify for a bank loan.
  • Need to close deals fast.
  • Want to save money by avoiding extra costs for things like appraisals and inspections.
  • Or all of the above.

So, what gives hard money such a bad rap? Well, most of the time, it’s because real estate investors jump into a hard money loan without understanding it.

So, what is hard money?

Well, it isn’t like your normal bank loan.

Bank loans are usually long-term. Like, 15-30 years. Hard money, on the other hand, is intended to be short-term, like 3-6 months. If you keep a hard money loan longer than a year, then you’re not really using it correctly. Because, yes, hard money lenders charge higher interest rates than banks. There’s no denying that. And you don’t want to pay those rates longer than you need to.

That’s why it’s so important to have a plan to flip or refinance a property before entering a hard money loan.

Another major difference between bank and hard money loans is the closing process. Bank loans take at least a month to close. They also require more paperwork and fees to make that closing happen.

Hard money loans can close in just a few days and require far less, well, requirements. You don’t need to worry about appraisals and inspections and other costs that don’t get taken into account with bank loans.

That’s why they’re perfect for fix and flips, rentals, and other value-add properties. You can find a great property, bid on it, and buy it FAST.

Basically, hard money is an excellent tool to help investors compete in a very competitive real estate business.

It’s not a scam.

And anyone who claims it to be scam has either never used it because they listened to the false rumors that spread many years ago. Or they’ve used it, but they didn’t use it right.

To learn how to use hard money right, check out some of our other videos on our Youtube channel.

Our team strives to help investors understand hard money so they can buy the properties they want, when they want…and without hurting their cash flow.

Happy investing!

The Truth About Hard Money: 3 Steps to Make Hard Money Cheaper

The Truth About Hard Money: 3 Steps to Make Hard Money Cheaper

The Truth About Hard Money: 3 Steps to Make Hard Money Cheaper

Have you ever wondered you can make hard money cheaper? Or have you always assumed there’s no such thing as “cheap” hard money?

Well, it’s time to explore the truth about this investor-friendly lending option. Because one of the biggest misconceptions about hard money is it’s took expensive.

Spoiler alert…This assumption is false!

Here’s the truth. Getting a hard money loan doesn’t mean automatically paying 12% interest or higher. Actually, if you take these 3 steps, you can pay a lot less for it.

Experience is everything

That’s right. If you can prove you have real estate experience, a lender will feel a lot more confident giving you money. And when a lender feels confident about a client, they will offer lower rates.

How can you present your experience to a hard money lender? Well, the best method is to create a real estate portfolio. This portfolio should include things like:

  • Before and after pictures
  • Budgets
  • Profits earned

Put SOME money down

If you’re willing to put money down at closing, then a lender will see you’re serious about your deal and lower the cost of your loan. Because it helps lower their risk.

How much of a down payment should you make, you ask? The ideal amount would be 10% or more, but even 5% would ease the cost of your loan.

Manage your credit score

We know you’ve heard it once, but it bears repeating. Your credit score matters, especially when it comes to qualifying for a competitive loan. Because the higher your score, the lower your interest rates.

But, let’s say your credit score is lower than 670. Well, don’t get flustered, because you can quickly raise it if you follow some of our credit boosting tips, including these 3:

  • Keep your credit card in your wallet and, instead, focus on paying it down (or off). This method is simple, but effective. Just remember when you whittle your credit card balance down to $0, keep your card. Do NOT close your account. Closing an account that’s in good standing is anti-productive in keeping your score healthy.
  • Keep your card balance low. By that we mean only use 30% of your total maximum credit line. So if you have a  $1,000 maximum, don’t let your balance rise above $300. Pay it down every week or month to keep it under the 30% range. The credit bureau likes to see that.
  • Pay your bills and pay them on time. Again, simple, but effective. If you make your payments on time for the next 12 months, your score WILL go up.

Look, hard money can be pricy, but you can make it cheaper by following these 3 easy steps. In fact, we promise if you adhere to these steps, you will greatly reduce the cost of your next hard money loan.

Want more truths about hard money? Then stay tuned for our next video where we discuss the myth of getting trapped in a hard money loan.

Ready to chat about your hard money and other lending options? Our team is always here to help.

What is hard money? Learn more on our YouTube channel!

Happy investing!

How To Buy a Fix and Flip: The First Key Steps

How To Buy a Fix and Flip: The First Key Steps

How To Buy a Fix and Flip: The First Key Steps

Do you know how to buy a fix and flip? Because if you’re new to investing in real estate, there’s a chance you’re not sure where to begin this process.

You might think, “Well, I’ll just get a loan.” But do you know what “getting a loan” really means?

That’s why today we’re going to take a look at the different real estate lenders you can rely on—and which ones you might have to rely on until you boost your credit score, build a real estate portfolio, or complete one of the other qualifications that some lenders require.

To begin, there are 5 popular real estate lenders. Each one has various pros and cons, so let’s start with the most simple and basic lenders.

Friend or Family Member

The upside to asking a friend or family member for a loan is, well, you’re asking a friend or family member for a loan. You know them, and you probably know them very well…well enough to ask them for money.  The only qualification you really need is a decent relationship.

The downside is, well, you know them. They’re your friend, your dad, your sister, or someone else you have deep roots with. That makes the entire loan process way more personal, which means there’s a lot of potential for drama—both now and in the future.

Business Partner

Instead of going through a family member or friend, you can get a business partner. A business partner can lend you the money to buy a value-add property with very few if any qualifications. The big pro here is they take on most—if not all—of the financial risks. It’s their money, not yours.

On the flip side, it’s their money, not yours. That means some business partners get greedy. Rather than splitting profits fairly, they demand the lion’s share. To them, it might not matter if you were the one who did all the actual work. They took the risk, so they should get a bigger reward at the end of the day.

Hard Money

If you have some basic qualifications, you can skip the first two lenders we’ve talked about and get a loan through a hard money lender. Hard money loans (aka, Fix and Flip loans) are great when you need to close a real estate deal FAST. We’re talking days instead of weeks or months.

Unfortunately, hard money can be expensive. Rates tend to be higher than other lenders. But every hard money lender varies, so it’s absolutely worth shopping around. Plus, hard money loans aren’t intended to be long term, so the high cost can actually save you a lot of pain AND money in the long run.

What is hard money? Check out our truth revealing series on YouTube!

Banks

Banks are the most traditional lender out there. In fact, most real estate investors look to this type of lender before they consider any other. And, why not? Banks usually have the lowest rates available.

Unfortunately, banks also have the strictest requirements, and if you don’t meet those requirements, you’ll get rejected. Worse, the application process is a lot more in-depth, which means closing can take A LOT longer. Which means that perfect investment property you wanted gets snatched up by someone using a faster lender.

OPM

Aka, “Other People’s Money.” This is exactly how it sounds. You use other people’s money to buy a property. This is different than asking a family member, friend, or business partner for financial help because there are more boundaries. With OPM, a lender charges interest. That’s it. There aren’t points or profits involved. It’s simple and easy.

The only downside of OPM is finding those who are willing to lend their money to you. But that’s where gaining experience and knowledge in real estate investing helps. The more you know, the more you can prove you’re worth the investment.

So, there you have it. Those are the 5 ways to buy a fix and flip property. Each one has its pros and cons, but each one is a viable option. It just depends on YOU and your financial situation.

Bad credit? No credit? You might have to start with a family member, friend, or business partner

Great credit? Solid income? Extensive real estate portfolio? You probably can jump straight to hard money or a bank loan. Or, better yet, OPM.

Each investor has a different path.

Ready to find out what your path is? Great! Our team is here to help. We’re excited to set you on a path that helps you make the kind of money you need…to live the life you want.

Happy investing!