Hard money loans can help you make a fortune in real estate investing. Whether you’re just starting out or you have years of experience investing, you can definitely take advantage of the enormous leverage these special loans provide.
When you decide to use hard money loans to buy real estate for investment purposes, one of the first things you need to do early on is to think about your exit strategy.
Your exit strategy is essentially what you plan on doing with a particular investment deal in order to profit from it. For example, you might want to invest in a property so that you can fix it up and then sell it for a profit as soon as you have it ready. Another example of an exit strategy is investing in a property so you can hold onto it as a rental property for long term gains.
Once you’ve picked your exit strategy and decided you will be using a hard money loan to fund your deal, your next step is to crunch some numbers and complete your due diligence process. Like they say, “the money is in the deal,” so you want to “buy right” in order to make sure you profit.
You can find deals from motivated sellers in all kinds of situations — people facing foreclosure are a good example of motivated sellers, abandoned property owners are also likely to be motivated to sell and so are distressed out of town landlords.
Once you find your deal from a truly motivated seller. you want to negotiate and put it under contract because your hard money loan lender will definitely want to see that binding document before they can lend out any funds.
With your deal under contract, you will then need to find and contact a loan broker or lender who specializes in hard money loans for real estate. Hard money loans are typically not underwritten by conventional banks or credit unions like conventional real estate loans are.
After you get your funding and buy your investment property from a motivated seller, the next step is to get it fixed up so you can get it ready for the market. You can do this yourself or you can find independent contractors to help you with the repairs.
In most cases, hard money loans for real estate will make a provision for repair money. So going back to “buying right,” if you got your repair costs estimated correctly, then you shouldn’t have a lot of problems at this stage.You will have enough money to fund the repair costs.
The final stage of course is executing your exit strategy just like you planned at the very beginning of your project. Here’s where you put the deal on the market and either sell it to an end buyer or you hold onto it as a rental property.
As you can see, hard money loans for real estate can really help make the process of investing and profiting with real estate so much smoother. Take advantage of these special loans and use them whenever possible.