Sometimes the best deals come when investors already have their own cash and bank financing tied up in a flipping project they’re still working on. Or maybe you’re an investor who just doesn’t want to use your own money but would rather leverage Other People’s Money (OPM). Maybe you have a deal at such a good price that you could earn your biggest profit yet. Maybe you want to grow your business so that you’re doing more deals each month than ever before. For all of these reasons, and many others, you may want to finance your next deal through a hard money lender Philadelphia.
Is that a good idea? What’s the difference between getting financing from a bank versus a hard money lender in Philadelphia?
Let’s be clear about what a hard money loan is: Typically if you wanted to borrow money from a bank to flip a house, you’d be looking at getting a mortgage, which you would then pay off much sooner than scheduled. A hard money loan is a shorter term loan secured by the subject property from a non-traditional lender (i.e. not a bank) for the purchase and renovation of a real estate investment. This is sometimes called a bridge loans as it helps investors “bridge the gap” between the purchase and the sale (or refinancing) of the investment property.
So, instead of dealing with a bank, why would a real estate investor consider borrowing from a hard money lender Philadelphia?
1. Faster than getting a mortgage – While a mortgage application at the bank may take some time, a hard money lender can often fund your deal in a matter of days with less red tape and usually less paperwork and hassle.
2. Loan based on the property, not your credit score – A hard money lender Philadelphia may not even check your credit score or ask to verify your income. Why? Because the loan is based on the property you’re rehabbing, not on your personal finances and ability to repay. Unlike your home that you’d borrow from the bank to get, a hard money lender Philadelphia knows that this is an investment you intend to make money from.
3. Shorter term borrowing periods – The interest rate from a hard money lender Philadelphia may be slightly higher than the bank, but the loan will be set up for a much shorter period, like 3 to 36 months.
4. Hard money lenders work with flippers – Most banks will not loan money for fixer-upper investment properties or houses in poor condition. Hard money lenders in Philadelphia understand what house flippers do.
5. It’s possible to scale up your flipping business – Banks have maximum exposure limits for borrowers, typically meaning one house-related loan per client. Meeting the terms of your first hard money loan helps you get to the point at which you’ll be able to fund multiple projects at a time with hard money loans.
While your bank may be the right lender for the mortgage on your personal home or your home equity line of credit, a hard money lender Philadelphia is the better way to finance your next house flipping project. As you prove that your real estate investment business can profitably flip houses, you will be able to access hard money loans and scale up the number of deals you’re closing and houses that you’re flipping.