If you're a new real estate investor looking to get into fix and flip projects, you may have heard of hard money lenders. They are private lenders who offer short-term loans secured by real estate, and they are often the go-to financing option for fix and flip investors. However, as a new investor, you should steer clear of hard money lenders and consider alternative financing options. Here's why. Send me Your Deal Here:
High-interest rates and fees Hard money lenders charge high-interest rates and fees, which can significantly eat into your profits as a new investor. You're already taking on a risky investment, and adding high costs could make it even harder to turn a profit.
Short repayment terms Hard money lenders require short repayment terms, usually within six to eighteen months. As a new investor, you may not have the experience or the resources to complete your project within such a short time frame.
Limited flexibility Hard money lenders have strict lending criteria and are not flexible with their loan terms. They may require a minimum credit score, down payment, and have strict appraisal requirements. As a new investor, you may not meet these requirements, making it difficult to secure financing.
So what financing options should new investors consider for their fix and flip projects? Here are some alternatives to hard money lenders:
FHA 203(k) loans FHA 203(k) loans are government-backed loans that allow you to borrow money to buy and renovate a property in one loan. These loans have lower interest rates and fees and longer repayment terms than hard money loans.
Home equity loans or lines of credit If you already own a home with equity, you can consider taking out a home equity loan or line of credit to finance your fix and flip project. These loans have lower interest rates and longer repayment terms than hard money loans.
Private loans from family and friends If you have family or friends who are willing to invest in your project, you can consider taking out a private loan from them. These loans may have lower interest rates and more flexible repayment terms than hard money loans.
In conclusion, as a new real estate investor, you should avoid hard money lenders for fix and flip loans. High-interest rates and fees, short repayment terms, and limited flexibility make them a risky financing option for new investors. Instead, consider alternatives such as FHA 203(k) loans, home equity loans or lines of credit, or private loans from family and friends. With the right financing, you can successfully complete your fix and flip project and achieve your real estate investment goals.
Fix and Flip Loans For New Investors… NEVER use a Hard Money Lender
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By: Awakened Funding Title: Fix and Flip Loans For New Investors… NEVER use a Hard Money Lender Sourced From: www.youtube.com/watch?v=VRi1-hWGRGI
