Flipping Real Estate With Hard Money Loans
Hard money loans for the acquisition and renovation of residential and commercial investment property allow many real estate investors to move quickly with fewer lender restrictions in a competitive market. These loans also provide an alternate source of funds for investors who cannot qualify for traditional loans or for those who concentrate on projects that are difficult to get funded through conventional sources of financing.
There are a lot of advantages to using hard money loans to finance real estate projects:
Expedited underwriting process
Often no or limited management committee involved
Accessibility of key lender personnel
Loan amount typically based on percentage of purchase price + rehab costs
Borrowing costs may go down with proven track record and repeat business
Generally loans are interest only based on the capital funded
Lenders not usually interested in an equity position in your project
There can also be some perceived disadvantages as well:
A business plan or executive summary may be required
You may need to provide a personal financial statement
A proven track record of successful projects might be necessary
Interest rates will be upwards of 18% and not usually lower than 10-12%
Origination cost could be anywhere from 0-8% of the loan amount
Minimum interest period for the loan may be longer than you desire
You might have to personally guarantee the loan
Brent Hall is a Broker Associate with Jameson Sotheby's International Realty, Chicago. Contact Brent Hall to discuss buying or selling real estate in Chicago.