Why Hard Money Loans Work for Fix-and-Flip Projects

Guest Blog from Anchor Loans

Why Hard Money Loans Work for Fix-and-Flip Projects

Getting financing is a crucial part of any fix-and-flip project. While you’re looking at blueprints and projecting how your new property will look once you’ve finished your updates, you’re likely strategizing about how to pay for it all!

Fortunately, financing your project doesn’t have to be a complicated process. By utilizing a Hard Money Loan you can fund your project quickly and get to work on your renovations. 

What is a Hard Money Loan?

Hard Money Loans are short-term loans secured by real property. Unlike a traditional mortgage, which is generally approved based on credit scores and income levels, Hard Money Loans are primarily based on the value of a collateral property. In fix-and-flip renovation situations, you’ll typically be borrowing against the value of the property you’re renovating and the lender will focus on the “after repaired value” (ARV) of the property to help determine the loan amount.  

The loan amount usually doesn’t exceed 70% of the ARV, so if your renovated property will be worth $200,000, the Hard Money Loan for your project wouldn’t exceed $140,000.

What are the benefits of a Hard Money Loan?

The key consideration for loan approval is the value of the real estate collateralizing the loan.  Another important factor that will affect leverage and pricing is the borrower's experience.  As a result, these loans are not dependent solely on a borrower’s credit history, which makes them a perfect investment tool for investors with credit challenges.

Hard Money Loans also tend to be approved and funded quickly and can be more readily customized for each individual client. Since repayment of these loans depends on the fix-and-flip investor finishing the project, repayment schedules, construction cost disbursements and other elements of the loan can be adjusted to suit individual needs.

 Finally, Hard Money Loans are typically short-term, giving the investor an opportunity to move on and work on other projects quickly. To gain the most benefit from a Hard Money Loan, it’s best to pay them off as quickly as possible. Most fix-and-flip loans provided by Anchor Loans are for a term of less than one year, and there is no penalty for early payoff.

How can I get started with a Hard Money Loan?

Anchor Loans is the nation’s leading lender for fix-and-flip investors. We’ve funded more than $6 billion in loans since 1998, and we are on target to fund over $1.5 billion in 2018. We’re confident we can help you meet your fix-and-flip investing goals with a Hard Money Loan today. To get started, contact us today and find out how we can tailor a loan to meet your unique needs. 

FixFlipRepeat was not paid or sponsored by Anchor Loans to share this blog post.