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Hard Money Loans: A House Flipping Financing Option

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Hard Money Loans: A House Flipping Financing Option

When it comes to a great house flipping financing option, hard money loans are a great tool. The hard money loan definition is a short-term loan for individuals purchasing residential or commercial real estate. Hard money loans give flippers cash for home purchases and property development with about a year to repay.

According to Daily Herald, house-flipping is making a comeback and many of the projects are being financed with hard money loans. Daren Blomquist, senior vice president of ATTOM Data Solutions, an Irvine, California-based property data firm, said that the prices of homes are going up in California:

“The housing market is in full boom mode, with prices up and homes selling quickly and consistently, which gives flippers more confidence to jump into the market. At the same time, they don’t have to compete against a flood of new construction like they did during the last spike in flipping in 2005-2006, when homebuilders were building like crazy.”

Rick Sharga, chief marketing officer of Ten-X, an online real estate marketplace that owns Auction.com, in Irvine, California told Daily Herald that house flippers are turning to hard money lenders:

“While a handful of community banks loan money to flippers, Sharga says, most investors turn to what are known as “hard money” lenders, which are individuals or small companies that specialize in making short-term loans, such as a one-year term at higher interest rates. Typically, these are local companies that know the real estate market and property values well and will cap the amount they will lend so they will be able to recoup the money if the borrower defaults on the loan. Sharga says they often require a down payment of 25 to 30 percent.”

Many investors use very little of their own money when it comes to house-flipping. They often finance the majority of the project with a hard money lender.

Unlike traditional lenders, hard money lenders can offer real estate investors partnership and communication. When you are flipping a house, financing isn’t the only thing you need. You want a lender who values open, two-way communication. Traditional lenders may have strict regulations for potential borrowers but hard money lenders work with the borrower to find a loan that works for them. Communication, integrity, and timeliness are important when it comes to finding a lender. Finding an alternative lender to handle these investments doesn’t have to be difficult. Find out more about HML Investments here.

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