How To Make a Profit Flipping Homes Using Hard Money Loans
Famous reality t.v. shows like ‘Flip or Flop’ or ‘Fixer Upper’ focus on the process but not the profit. They leave out important details like true costs, permitting nightmares, and houses that just won’t sell. Don’t let yourself get caught up in the fantasy of these Hollywood flipping shows. House flipping takes hard work, patience, research, and of course, lots of money.
But let’s dig right in and talk about the money part. It takes money to flip houses and make a profit. Chip and Joanna Gaines of the show ‘Fixer Upper’ have endless Hollywood production budgets for their flip projects.
But how does the average person get the cash to get started in house flipping? The ideal way to do it is with your own cash. But who has cash sitting around like that? Not many of us. Partners steal all of your profits, using family money is often a mistake.
So how do you get the money you need to get started in the business of house flipping? Enter hard money loans.
You may have heard a real estate coach or fellow colleague talk about hard money loans. The name “hard money” kind of hits you in the gut, it has a bit of a negative ring about it. But just like any tool, it can work to create great things, but it must be used properly.
Hard money loans are nothing more than a tool used by successful real estate investors to make a profit flipping houses. But how?
Here’s how to make money with a hard money loan
- Find all of the hard money lenders that lend on properties in your target locations. Get well acquainted with their requirements, their process for closing loans, and the price of the money.
- Get a bad property in a good location under contract using a proof of funds letter from one of your chosen hard money lenders. This will help you compete with cash offers because hard money financing is perceived to work very much like cash offers.
- Close on the property using a hard money loan.
- Fix the house and get it on the market and resell it as soon as possible.
- Pay off your hard money loan and then use it to fund your next deal.
Even real estate investors who have their own cash to work with rely on hard money lenders to fund their deals.
But why use hard money loans if you have enough of your own cash to do a real estate flip? Let’s imagine that you’re in the process of rehabbing a house and a new property suddenly comes on the market that’s perfect for a flip? If all of your own cash is tied up in the house you’re currently rehabbing, how do you take down the second house? Enter hard money loans.
Do you have a deal to present to us for approval? Get pre-approved and a letter of intent so you can start making money with a rehab loan.