Most house flippers scaling up their operations are using hard money loans Philadelphia to finance more deals and complete more flips. How do you catch up to them when you’re doing a couple flips a year using your own money and/or bank loans? We’re not going to sugarcoat it. Hard work is required to get to the point that you start qualifying for hard money loans Philadelphia so that you too can scale up your real estate investing business.
What does it take to qualify for hard money loans Philadelphia?
A good hard money lender understands the house flipping business and that makes them much better to deal with than your average bank loan officer who doesn’t understand your math. When you apply for a hard money loan, one instant benefit you get is an independent evaluation of your project. They’re only going to fund projects that are likely to turn a good profit.
Sometimes real estate investing books and videos make it sound like it’s easy to get a hard money loan that will fully cover all your costs for acquisition and flipping. That is not realistic in today’s housing market. A good hard money lender will approve of loans up to about 60% LTV (Loan To the Value of the house based on appraisal). Loans can be short term, like three to twelve months. Interest rates of 10 to 15% with origination fees of 2 to 4% are typical on hard money loans Philadelphia. After the house is purchased, money can be drawn from the lender as renovation work is completed.
Hard money lenders are looking for you to have skin in the game, like 10 to 20% down. They will also be looking at your flipping experience, your track record with them (if you’re a repeat customer), and your ability to repay including your cash reserves.
What can you do to qualify?
It makes sense that to run a successful flipping business, you need to have capital available for projects and cash reserves. It also makes sense that hard money lenders are more likely to lend to experienced flippers. So how can you get there?
Find a partner. If you’re able to find a deal and oversee the flip, you may be able to find someone to partner with through your local real estate investing club. You could do a few flips with someone who is more experienced to bring up your experience level.
Another great option is to wholesale houses. You need to be good at finding good deals. So why not get that experience by wholesaling several houses to rehabbers? You’ll be building up your cash and making connections. Then when you find a really good deal, you’ll be all set to apply for your first hard money loan.
It takes hard work and commitment to get to that point when you’ll be able to easily qualify for hard money loans. Once you get to that point, though, you’ll find it so much easier to scale up to the flipping business you had in mind from the start.