July 3, 2025

The quiet hum of nail guns, the smell of sawdust, and the return of “Open” signs in once-forgotten downtown windows, this is the new soundtrack of small-town America. But behind the visible revitalization of rural Main Streets is something less visible but just as powerful: hard money lending.

While hard money loans have long been associated with fix-and-flips in big cities or fast-turnaround real estate plays in hot urban markets, a quiet revolution is underway. More and more investors are tapping into the flexibility of hard money to fund opportunities in America’s overlooked ZIP codes: small towns, rural counties, and working-class neighborhoods where banks are reluctant to tread.

Why Small Towns Are the Next Big Thing for Real Estate Investors

A post-pandemic migration, skyrocketing urban prices, and remote work have pushed families, retirees, and entrepreneurs into more affordable, livable places. As a result, smaller communities across Texas, Tennessee, North Carolina, and the Midwest are seeing population growth for the first time in decades.

But opportunity often arrives before infrastructure. In many cases, housing stock is outdated, commercial buildings sit unused, and traditional financing is stuck in bureaucratic slow motion. That’s where savvy investors and hard money come in.

Hard Money’s Small-Town Superpower: Speed and Simplicity

Let’s be honest: banks aren’t built for agility. Especially not in rural lending. Between their strict underwriting requirements, lengthy appraisal timelines, and risk-averse boards, conventional lenders often pass on promising properties simply because they don’t understand the market or they’re just not interested in dealing with small deals in small towns.

Hard money lenders, however, look at one thing: the asset.

If the numbers make sense, the money moves.

That speed and simplicity can be the difference between securing the historic duplex on Main Street that’s been sitting empty for 12 years or losing it to another investor.

Real-world example:
A husband-and-wife investor duo in rural Arkansas recently used a hard money loan to buy and renovate a fourplex for $190,000. All cash, in 14 days. Local banks required 25% down, full income documentation, and had a 45-day close. The property now cash flows $1,800 per month. That’s small-town gold.

Small Towns, Big Margins

Contrary to belief, small towns often offer higher ROI for rental properties than big cities. Lower purchase prices, low property taxes, and less competition mean you can get into deals with far less capital and often make more per dollar invested.

Hard money unlocks these plays.

Fix-and-rent strategies thrive here.
BRRRR methods (Buy, Rehab, Rent, Refinance, Repeat) are often easier with local tenants and less red tape.
And even short-term rentals in small towns near lakes, parks, or festivals are gaining steam.

Community Impact with Capital Returns

There’s a story here that goes beyond dollars. Hard money is not just fueling profits. It’s fueling change. Every abandoned home turned rental, every boarded-up storefront turned coffee shop, every converted barn turned wedding venue is part of a larger narrative: economic resurrection.

Hard money lenders, once seen as opportunists, are increasingly acting as accelerators of renewal. And investors who think beyond the skyscrapers and condos are discovering that the heartland has plenty of heartbeat and upside.

What to Look For If You’re an Investor

If you’re thinking of leveraging hard money to break into small-town markets, here are a few smart filters:

• Population growth over 5 years. Even a 2 to 3 percent uptick is a strong indicator in rural areas.

• Proximity to outdoor amenities. Lakes, trails, historic districts, festivals.

• Tight rental inventory. Call local property managers and ask about vacancy rates.

• Distressed properties under $150,000. Often ignored by conventional buyers but perfect for hard money-backed flips or rentals.

Final Thought: This Isn’t a Fad. It’s a Reset.

The age of urban exodus is no longer theoretical. It’s measurable. And while big institutional money floods cities and suburbs, individual investors with vision and access to hard money are quietly transforming the towns most people forgot about.

They’re not just chasing yield. They’re rebuilding roots.

So if you’re an investor tired of bidding wars, overpriced metros, and red tape, you might want to take a different route. Drive an hour outside the city. Look for the “For Sale By Owner” signs on overgrown lawns. The ones the banks won’t touch.

Then pick up the phone, call a hard money lender, and make your offer.

Because the next boom isn’t just coming. It may already be parked on a quiet street with peeling paint and a whole lot of potential.

January 10, 2025

As we step into 2025, the hard money lending market is undergoing notable changes that stand to reshape the industry. These changes are influenced by evolving regulatory frameworks, shifts in investor and borrower behavior, and advancements in technology. For seasoned lenders, borrowers, and new entrants to the market, understanding these developments is critical to staying competitive and making informed decisions. Let’s dive into the key trends and changes that will define hard money lending in the coming year.

Regulatory Adjustments: Tightening Oversight and Transparency

One of the most significant changes in 2025 is the increased regulatory scrutiny on hard money lending practices. Federal and state governments are implementing stricter measures to enhance transparency and consumer protection.

• Standardized Documentation: Lenders are now required to provide more detailed and standardized loan disclosures. This ensures borrowers fully understand the terms and costs of their loans, reducing the likelihood of disputes.
• Interest Rate Caps: Several states have introduced or are considering caps on interest rates for hard money loans, aiming to curb predatory practices.
• Environmental and Social Governance (ESG): Lenders are increasingly being evaluated on their ESG criteria. Investors and regulatory bodies are emphasizing lending practices that promote sustainable and socially responsible projects.

The Rise of Technology: Efficiency Meets Innovation

Advancements in technology are playing a transformative role in the hard money lending space. From underwriting processes to borrower interactions, technology is streamlining operations and enhancing decision-making.

• Automated Underwriting: AI-driven platforms are enabling faster and more accurate assessments of borrower qualifications, property values, and risk factors.
• Blockchain for Transactions: Blockchain technology is being adopted for secure and transparent loan documentation, reducing the risk of fraud and improving efficiency.
• Data-Driven Decision-Making: Big data analytics is providing lenders with insights into market trends, borrower behavior, and property values, enabling them to make more informed lending decisions.

Market Trends: Adapting to Shifting Demand

The demand for hard money loans is evolving, with borrowers seeking financing for a wider array of projects. Here are some notable trends:

• Rise in Commercial Real Estate: As the economy stabilizes, commercial real estate investments are rebounding. Hard money lenders are seeing increased demand from investors looking to capitalize on undervalued properties and redevelopment opportunities.
• Increased Focus on Fix-and-Flip: The popularity of fix-and-flip projects remains strong, with borrowers leveraging hard money loans for quick financing to renovate and resell properties.
• Diversification in Loan Types: Beyond traditional real estate, lenders are exploring opportunities in construction loans, bridge loans, and even niche markets like short-term rental properties.

Challenges on the Horizon

While opportunities abound, 2025 also brings challenges for the hard money lending market:

• Economic Uncertainty: Fluctuations in interest rates and the broader economy could impact borrower demand and the profitability of lending portfolios.
• Increased Competition: With more players entering the market, lenders must differentiate themselves through competitive rates, superior service, and innovative solutions.
• Regulatory Compliance Costs: Adapting to new regulations may require significant investment in legal, administrative, and technological resources.

Strategies for Success in 2025

To thrive in this dynamic environment, hard money lenders should consider the following strategies:

• Embrace Technology: Invest in platforms and tools that enhance efficiency, improve customer experience, and provide actionable insights.
• Stay Ahead of Regulations: Proactively align your operations with emerging regulatory requirements to avoid penalties and build trust with borrowers and investors.
• Focus on Relationships: Cultivate strong relationships with borrowers, real estate professionals, and investors to create a robust network that drives repeat business and referrals.
• Expand Offerings: Explore new loan products and markets to diversify revenue streams and mitigate risk.

The hard money lending market in 2025 is marked by both exciting opportunities and formidable challenges. By staying informed, embracing innovation, and prioritizing compliance and customer relationships, lenders can position themselves for long-term success. As the industry continues to evolve, those who adapt will not only survive but thrive in this competitive landscape.

March 15, 2024

As we step into 2024, the landscape of the hard money lending industry is poised for significant shifts and transformations. With the ever-evolving economic climate, technological advancements, and changing consumer behaviors, it’s crucial to explore the potential trajectory of this sector in the coming year. Here, we delve into the key trends and insights that are likely to shape the future of hard money lending in 2024.

1. Increased Digitization and Automation: The trend towards digitization and automation is expected to accelerate in the hard money lending industry. Lenders will increasingly adopt advanced technology solutions such as AI-driven underwriting processes, blockchain-based smart contracts, and online platforms for loan applications and approvals. This digital transformation will streamline operations, enhance efficiency, and improve the overall borrower experience.
2. Focus on Risk Management: With economic uncertainties and market fluctuations, risk management will remain a top priority for hard money lenders in 2024. Lenders will implement more robust risk assessment methodologies, leveraging data analytics and predictive modeling to evaluate borrower creditworthiness and property valuations accurately. Additionally, there will be an increased emphasis on diversification of loan portfolios to mitigate potential risks and ensure sustainable growth.
3. Expansion of Alternative Lending Products: The demand for alternative lending products, such as fix-and-flip loans, bridge financing, and construction loans, will continue to grow in 2024. Hard money lenders will expand their product offerings to cater to diverse borrower needs and capitalize on emerging market opportunities. Moreover, innovative financing solutions tailored to specific niches, such as real estate crowdfunding and peer-to-peer lending platforms, may gain traction in the industry.
4. Integration of ESG Principles: Environmental, Social, and Governance (ESG) considerations will play an increasingly significant role in shaping the lending practices of hard money lenders. There will be a growing focus on sustainable and socially responsible lending practices, with lenders incorporating ESG criteria into their underwriting processes and investment decisions. This shift towards ESG integration reflects the industry’s commitment to promoting positive environmental and social impact while delivering financial returns.
5. Regulatory Compliance and Transparency: Regulatory compliance will remain a key area of focus for hard money lenders in 2024, as the regulatory landscape continues to evolve. Lenders will need to navigate complex regulatory frameworks and ensure compliance with applicable laws and regulations governing lending practices. Moreover, there will be an increased emphasis on transparency and disclosure, with lenders providing clear and comprehensive information to borrowers regarding loan terms, fees, and potential risks.
6. Collaboration and Partnerships: Collaboration and partnerships between hard money lenders, real estate investors, and other industry stakeholders will be crucial for driving innovation and growth in 2024. Lenders may forge strategic alliances with technology providers, financial institutions, and real estate professionals to enhance their service offerings, expand market reach, and access new sources of capital. Additionally, cross-sector collaborations may facilitate knowledge-sharing and best practices adoption across the industry.

In conclusion, the hard money lending industry is poised for continued evolution and adaptation in 2024. By embracing digital transformation, prioritizing risk management, expanding product offerings, integrating ESG principles, ensuring regulatory compliance, and fostering collaboration, hard money lenders can navigate the challenges and seize the opportunities that lie ahead in the dynamic landscape of real estate finance.

May 24, 2023

When it comes to borrowing money, individuals and businesses have a variety of options available. Traditional loans from banks and financial institutions have long been the go-to choice for many borrowers. However, hard money loans have gained popularity in recent years. Both loan types serve different purposes and come with their own set of advantages and considerations. In this article, we will explore the key differences between hard money loans and traditional loans, helping borrowers make informed decisions based on their unique circumstances.

Loan Approval Process

One of the most significant distinctions between hard money loans and traditional loans lies in their approval process. Traditional loans typically involve a rigorous evaluation of the borrower’s creditworthiness, income stability, and financial history. This process can be time-consuming, requiring extensive documentation and verification.

On the other hand, hard money loans focus less on the borrower’s financial background and more on the value of the collateral used to secure the loan. These loans are usually approved quickly, sometimes within a matter of days, as long as the collateral possesses sufficient value. This makes hard money loans particularly attractive for borrowers with poor credit scores or unconventional financial circumstances.

Collateral Requirements

Collateral plays a crucial role in both hard money loans and traditional loans, but the type of collateral required differs significantly. Traditional loans often require tangible assets such as real estate, vehicles, or equipment as collateral. Lenders meticulously assess the value and condition of the collateral to mitigate their risk.

In contrast, hard money loans primarily focus on the value of the property being financed. Real estate serves as the most common form of collateral for hard money loans. The lender evaluates the property’s current worth and potential for future value appreciation. While the collateral requirements for hard money loans may be less stringent in terms of credit scores and income, borrowers must ensure that the collateral possesses sufficient value to secure the loan.

Interest Rates and Terms

Interest rates and loan terms are significant factors to consider when comparing hard money loans and traditional loans. Traditional loans typically offer lower interest rates since they are backed by rigorous evaluation processes and have more favorable terms. These loans may have longer repayment periods, allowing borrowers to spread their payments over several years.

Hard money loans, however, are associated with higher interest rates due to the increased risk for the lender. The shorter loan terms, usually ranging from a few months to a few years, also contribute to higher interest rates. These loans are often used for short-term projects or for borrowers who need immediate funds and plan to refinance or sell the property quickly.

Purpose and Usage

The intended purpose and usage of the loan is another aspect that distinguishes hard money loans from traditional loans. Traditional loans are typically sought for personal use, such as buying a home, financing education, or funding a business venture. These loans are more flexible in terms of usage and can cater to various financial needs.

Hard money loans, on the other hand, are commonly used for real estate investments, fix-and-flip projects, or property rehabilitation. They are favored by real estate developers and investors who require quick access to capital to seize lucrative opportunities. The short-term nature of hard money loans aligns with the fast-paced nature of real estate transactions.

Understanding the differences between hard money loans and traditional loans is crucial for borrowers seeking financial assistance. Traditional loans provide stability, lower interest rates, and longer repayment terms but require a more extensive approval process. In contrast, hard money loans offer speed, flexibility, and accessibility to borrowers with less favorable credit scores or unconventional financial situations.

May 10,2023

Flipping houses can be a lucrative venture if done correctly. In 2023, the real estate market is expected to remain strong, presenting a great opportunity for investors to make a profit by flipping houses. However, as with any investment, there are risks involved, and success largely depends on a variety of factors, such as timing, market conditions, and renovation costs. In this article, we will provide a comprehensive guide on how to make a profit flipping houses in 2023.

Research the local real estate market Before investing in any property, it is essential to conduct thorough research on the local real estate market. This includes analyzing current trends, such as property values, demand, and inventory, to identify opportunities that will generate a profit. Factors such as population growth, job opportunities, and infrastructure development can also affect the market, making it essential to keep a close eye on these variables.

Find the right property Once you have identified an opportunity in the market, it’s time to start looking for the right property to flip. Ideally, you want to find a property that is undervalued and in need of renovation, allowing you to add value and sell for a higher price. Look for properties in desirable neighborhoods, as these are likely to generate the most significant returns.

Calculate renovation costs Before purchasing a property, you need to calculate the renovation costs. This includes estimating the cost of materials, labor, and any additional expenses, such as permits or inspection fees. Be sure to factor in a buffer for unexpected expenses, such as hidden damages or unforeseen issues that may arise during the renovation process.

Secure financing Flipping houses requires a significant amount of capital, which can be obtained through various financing options. This includes traditional bank loans, private lenders, or hard money lenders. Before securing financing, ensure that you have a solid business plan in place that outlines your goals, timelines, and expected returns.

Renovate the property Renovating the property is one of the most critical aspects of flipping houses. The goal is to add value to the property without overcapitalizing on unnecessary upgrades. Focus on renovations that are essential, such as updating the kitchen and bathrooms, replacing flooring or fixtures, and repainting the interior and exterior. Be sure to stay within budget and stick to the renovation timeline to avoid additional expenses.

Price the property correctly Once the renovation is complete, it’s time to price the property correctly. Research the local market to determine the appropriate price range for the property based on its location, size, and condition. Price the property competitively to attract potential buyers while still generating a profit.

Sell the property Once the property is priced correctly, it’s time to sell it. Hiring a reputable real estate agent can help to ensure a smooth selling process. Be sure to showcase the property’s best features and highlight any upgrades or renovations that were made. Consider staging the property to make it more attractive to potential buyers.

Calculate profits After the property has been sold, it’s time to calculate the profits. This includes subtracting the initial purchase price, renovation costs, and selling expenses from the final sale price. The remaining amount is your profit. Be sure to factor in taxes and any other fees that may apply.

Repeat the process Flipping houses is a continuous process that requires persistence and dedication. Once you have completed your first flip, repeat the process by identifying new opportunities, securing financing, renovating the property, and selling it for a profit. Over time, you will develop a system that works best for you and generate consistent returns.

In conclusion, flipping houses can be a profitable venture in 2023 if done correctly. To ensure success, it’s essential to research the local real estate market,  find the right property, calculate renovations and projected profits correctly, and then repeat the process in order to be successful.

October 14, 2022

Deciding to start flipping houses can be a solid option for generating extra revenue, particularly if you are talented in home design or are handy with doing repairs without hiring someone. That said, it’s typically not as cheap as many people believe. You’re not just purchasing land and a structure; you’re also buying appliances and any repairs and remodels you can’t do by yourself. You’re also often left with a situation where you may be waiting on the sale before you can collect any profits. This process can sometimes take months or even years to complete. Luckily, there are several financing options out there for house flippers to research and decide what options may work best for their specific needs. Below we will look at a few loan options to get you from start to finish until you can start collecting revenue on your new flipping investment.

Commercial Loans

Commercial loans are loans secured by liens on a commercial property. If the borrower does not have a well-established financial track record or high enough credit rating, lenders may require the borrower to guarantee the loan. If a loan guaranty is not required, and the property is the only means of recovery in the event of default, it is a non-recourse loan. Lenders have no recourse against anyone or anything beyond the property. Generally, the longer the loan repayment schedule, the higher the interest rate will typically be. Commercial loan Interest rates tend to be higher than on residential loans.

Home Equity Loans

A home equity line of credit is secured by utilizing your primary residences equity when you own a home. You can often get financing at a low interest rate. Home equity loans are, as the name indicates, based on home equity.  Equity is calculated by taking the value of your home minus what you owe on the mortgage.

Investment Line of Credit

With a line of credit loan, you borrow against your investment property’s equity. The property serves as collateral to repay the loan in the event something goes wrong during the repayment process. To qualify for a line of credit loan, you will most likely need good to excellent credit, and a history of successful real estate investments. In general, you must own the property at least one year to be considered eligible for a line of credit loan. As a result, lines of credit loans are usually not the best option for first time house flippers as they have not established a successful track record of real estate investment yet.

Bridge Loans

Bridge loans are intended to cover the “gap” between when you want to buy a property, and when you can secure long-term financing.  As a result, these loans are sometimes referred to as “gap” loans. They can be utilized to help cover the down payments expenses on your next flip so you can focus on finding another financing option to cover the rest of the purchase amount. Bridge loans are generally secured using some form of collateral in order to qualify for a loan with a lower interest rate compared to other loan options out there. Bridge loans are often easier to qualify for than other types of loans which make them appealing to flippers who are just starting out.

Cash Out Refi

Cash out refinance loans make it possible for you to use an existing properties equity to fund your next house flipping project or to make any necessary repairs or remodels needed. Borrowers can use their own home’s equity to take out a new loan and pay off the existing mortgage, and then use any remainder to finance their flipping project. Typically, in order be cost effective, you will generally need to have accumulated at least 30-40% equity in your home in order for as cash out refi to be an effective solution for you.

Traditional Bank Loans

Traditional bank loans are mortgages with fixed interest rates. Bank loans are usually best for those buying a home to stay in for at least 5 years while renovating it to sell for a profit. With a traditional bank loan, you will generally pay a lower interest than with other financing options and have up to 30 years to pay back the loan which makes them ideal for primary residences.  In order to qualify for a traditional loan, however, you will need enough for a down payment, a solid credit score, and a stable income.  The fed has recently raised the rates on these loans in order to curb inflation which is making most real estate markets grind to a snail’s pace as they transition from a seller to a buyers’ market.

Hard Money Loan

With a hard money loan, you work with non-bank lenders, individuals or lending companies like the 1,000’s of companies in our free online nationwide directory at hardmoneyhome.com. Hard money lenders often have less stringent eligibility requirements and you can often qualify even with little to no credit. These loans tend to have significantly higher interest rates, often with shorter repayment terms so it is critical to fully do your research before agreeing to the terms of any of these types of loans. That said, these loans are a great option for many investors and when used correctly can generate enormous gains in real estate revenue.

Whether you have been fixing up and flipping houses for decades or are interested in just getting started in house flipping to generate some extra revenue, try the above financing solutions to hopefully lay out less of your own hard-earned money to start flipping your next home investment project.

August 25, 2022

All investment opportunities come with common facts and falsehoods, which is why it is so important to do your research ahead of time to distinguish what the truth is for your situation.  If you desire to be independent financially, then investing in real estate can be a great place to start. This market can at times be a bit challenging for new investors which is why a good real estate agent can help you start off right in a big way.  Below we will explore some of the most common real estate facts and falsehoods to help you decipher the differences.

You Need A Lot Of Capital

Most new investors believe that you need a lot of money to start investing in real estate, but that is far from accurate. Investing is not the same as owning a property; when you invest, you should expect to get a return from the money you’ve invested, which will make it possible for you to pay back your mortgage over time.  If you want to invest in real estate, you can look for partners or private money lenders. All in all, every investment is a risk, so you should always have a plan B in place ahead of time.

Buying Beats Renting

A common falsehood in real estate investing is that you must have your own home first before investing in other real estate. This is simply not the case.  Many new investors are investing in real estate while still renting the place they currently live in. This is very common with people who rather wait to save up for their dream home by investing until they have enough capital in reserves to buy or build what they desire long term.  Many new investors own vacation rentals or condos first and see a great return while they build equity for their future projects and goals.

Fix And Flipping Equals Quick Cash

This is perhaps one of the most common falsehoods circulating in the real estate industry, where investors buy rundown houses, fix them up and sell them for a profit. Cable network programming often highlights this tactic of real estate investing.  While it’s possible to profit from flipping houses, they are far from a get-rich-quick fix as it requires a careful and calculated plan. To be successful, you must survey the property, calculate the total repair and labor costs, at end a 10-20% buffer for unexpected expense contingencies, and ensure that the amount you pay for the property is not more than 70% cost of repairs. If everything goes to plan, you stand to make about 30% profit after all your hard work is done.  You must keep in mind though that if the real estate market crashes or takes a significant hit, you don’t have to sell the property at a loss; you can hold on to it until the market recovers.  At the end of the day, you can see many examples of how real estate is not the best way to get rich quick without a lot of time and headaches.

Good Land is Rare

Most real estate agents will try to encourage new investors to buy a particular piece of land by convincing you that you’ll never come across such a plot again as land is scarce across the country and the population is increasing.  By these metrics, they argue that the price of land will continue to rise.

While it’s true land is limited throughout the country, advancements in building technology are making it much easier to maximize the use of available land out there and even if the population does increase, there will still be enough land with current death and birth rates, so there should not ever come a time when the amount of good land available will not be adequate for future needs.

Being A Landlord Is Too Difficult

It is true that owning an investment property can be a lot of work, especially if you have difficult or demanding renters. On top of that, you will have to ensure that your rental property is maintained properly, accounting is current and rent is collected in a timely manner.  Luckily, you don’t have to do all of these things alone; many new investors utilize a property management company to manage their investment property for them. Just understand that you will have to pay them a certain amount which will need to be accounted for in your bottom line but it can be well worth the cost if they take all or even most of the headaches off your plate.

To start investing in real estate, a wise new investor will make sure to research ahead of time and figure out the differences between common facts and falsehoods within real estate investing.  By taking this approach, this will help you avoid being led astray to purchase a property that is not worth the return on your investment and also help you develop your sixth sense when it comes to real estate opportunities. If you find a good real estate agent you trust, they can be a great resource especially when you are first starting out, to help you discern what is the best opportunity for you to get started when investing in real estate.

June 18, 2021

Flipping houses is a common option for generating extra revenue, particularly for those who are good at handyman type repairs. That said, it’s often not a cheap endeavor. The cost can add up quickly because you’re typically not simply buying the land with a building on it; buy also appliances, and are on the hook for any repairs and improvements you can’t do yourself. You must wait on the sale of the property before you can collect any profits. This process can often take months or even years to complete. Luckily, there are several financing options out there for flippers. Below are some of the common options to help bridge the gap until you can collect from the sale.

Commercial Loans

Commercial loans are loans secured by liens on commercial property. If the borrower has no financial track record or credit rating, lenders will typically require them to guarantee the loan. If a guarantee is not required, and the property is the only means of recovery in the event of default, it is known as a non-recourse loan. In this scenario, lenders have no recourse against anyone or anything beyond the property. Generally, the longer the loan repayment schedule, the higher the interest rate. Commercial loan Interest rates tend to be higher than on residential loans so its important to understand how much interest you will be expected to repay before agreeing to any commercial loan deal you are offered.

Equity Crowdfunding

Equity crowdfunding’s are equity stock offering from a company not listed on exchanges, which differs from rewards-based places (like Kickstarter) where investors get an incentive/perk for their donation. With equity-based crowdfunding, the investor receives equity.  Flippers in these scenarios do not need to become a fully reporting public company and investors don’t not be accredited, which makes for fewer hoops to jump through when securing financing of a real estate flip investment.

Home Equity Loans

A home equity line of credit is a loan secured by your primary residence when you own a home. You can usually get financing at a low interest rate with these types of loans. Home equity loans are, as the name indicates, based on home equity.  To figure out the potential equity you may have to invest, you should take the current value of your home and subtract what you owe on the mortgage. The difference will give you the equity accumulated on your primary residence.

Investment Property Line Of Credit

For this type of line of credit, you borrow against your investment property’s equity. The property serves as collateral to secure the loan. To qualify for these, you will generally need good to excellent credit, and a history of successful real estate investments. In general, you must own the property at least one year for eligibility. As a result, investment property lines of credit are usually not the best option for first time house flippers.

Business Line Of Credit

With a business line of credit, you get access to a revolving credit line. You can use up to a set amount, but only make payments and pay interest on the amount you actually use. You may use it repeatedly if/when issues pop up or when it’s time for your next real estate flip. You generally need great credit, with a stable history of flipping success to qualify for a business line of credit.

Seller Financing

With these deals, you work directly with the seller to come up with the terms of a payment plan and create an agreed upon contract. You will pay directly to the seller on an agreed-upon schedule, based on a price you both set, with interest. This poses more risk to the original property owner. Therefore, you will often pay a higher interest rate, with a shorter repayment term than other types of loans.

Bridge Loans

Bridge loans cover the gap between when you want to buy a property, and when you can secure long-term financing. They can be used to help cover the cost of the down payment on your next flip. This frees you up to then focus on finding another financing option to cover the remaining amount. Most of the time, bridge loans will be secured with collateral, so you can often get approved for a loan with a lower interest rate, versus other options. Bridge loans are generally easier to qualify for than most other types of loans.

Cash Out Refi

Cash out refinance loans enable you to refinance an existing property to fund your house flipping project or for any necessary repairs. Borrowers can put up their own home’s equity to take out a new loan and then pay off the existing mortgage balance. Once complete, they may then use any remainder balance to finance their flipping projects. In order to be cost effective, however, you generally need 30-40% equity in your home. Otherwise, a cash out refinance loan is likely not the best option for you.

Long Term Bank Loans

These are traditional mortgages with fixed interest rates. Bank loans are usually best for those buying a home to stay in for five years or more while renovating it. You will usually pay lower interest than with other financing options with up to 30 years to pay. With these traditional loans, however, you will need enough for a down payment, good to excellent credit, and a stable income, to qualify.

Hard money loans

With hard money loans, you work with non-bank lenders.  Hard money lenders often have less stringent eligibility requirements and you can often qualify even with poor credit. These loans tend to have higher interest rates, often with shorter repayment terms.

Conclusion

Whether you are a long term fix and flip investor or are interested in just getting started in house flipping to generate some extra income, try the above funding options to hopefully lay out less of your own money on the path of generating a new stream of investment income.

If you are planning on investing in real estate and want to fix and flip a home in order to make a profit, chances are people are going to be telling you all types of things and giving you all types of tips on what you should do and how you should do it. Some of these tips will be great—others, not so much, but one of the many “rules” you will likely hear when it comes to making a profit with your investments is the “70 Percent Rule.”

This is one of the most important and universally agreed upon rules when it comes to fixing and flipping a property?

So, what is the 70 percent rule when applied to fix and flip properties and how can you use it to your advantage?

The 70 percent rule states that an investor should pay 70 percent of the ARV, or the After Repair Value, of a property, minus the repairs needed to get the home ready to sell. This ARV is what the home is worth after it is fully repaired and ready to be sold.

So, for example if a home’s ARV is $300,000 and it needs $50,000 in repairs, then the most you should pay for the home is $160,000. Sure, it may seem as though buying a house that cheap means that you are going to make a huge profit, but after you go through closing costs, unexpected expenses (and there will be some), staging and every other cost that unexpectedly comes your way—you want to have this much potential profit margin to make sure you even end up making money at all.

It can be so tempting to try and “cut it close” when buying a house to fix and flip, but if you are new at fixing and flipping and don’t really know what you are doing, you are going to be really happy you kept to this rule. Otherwise, you can end up losing money on your first flip and ending your fixing and flipping career before it ever really gets off the ground.

Remember, if you want to make sure you are making a small amount or breaking even on these first few fix and flips so that you have enough money to keep your efforts going and to keep fixing and flipping properties moving forward.

Keep the 70 percent rule in mind and do your math before you decide to invest in a property. Keeping this rule in mind as you make your financial decisions will only help you get off on the right foot when investing in any property that comes your way.

If you are getting ready to get into the fix and flip market, and are looking to make some serious money from your upcoming flip—then you need to take some extra steps to make certain your flip really stands out. If you are anything like us, then when you are planning on financing and selling a flip, there is nothing as fun as binge watching some HGTV to help you feel more inspired.

HGTV can be great, and a lot of fun to watch. However, sometimes HGTV sets some very unrealistic expectations for those who are interested in actually flipping a property to make money. There are many precautions you should take when turning to HGTV for advice—but there are also some great pieces of inspiration that you can take from HGTV.

Here are a few updates that you can actually take from HGTV, and inspiration from Love It or List It and other shows that will help your flip really stand out.

• Don’t underestimate a fresh coat of paint. If there is one thing that the teams on these HGTV shows always do, it is painting. A fresh coat of paint on the interior and exterior of the home can make a major difference in the way that property looks. Choose neutral colors and don’t underestimate hiring a professional in order to get a professional finish.
• Don’t forget windows and doors. Windows and doors are expensive to replace—there is no denying. But this is another one of those things that you will see the professional flippers always pay attention to. You won’t see a professional home renovator skip replacing windows and doors—so you shouldn’t either. It’s going to be worth the investment anyway and it is a great fact to include on your listing details.
• Refinishing hardwood floors. If you are restoring an old home (as many flippers do) then don’t get too replacement happy. You can restore old hardwood floors for a fraction of replacing them and many times buyers love historic restored floors even more than new tiles or laminate.
• Don’t forget about lighting. Light fixtures are like adding accessories to a great outfit, they can take a home up to the next level and really make it shine. You don’t have to spend thousands on expensive light fixtures, but putting a few statement making fixtures throughout the home can really help it stand out from other flips.
• Faucets can be fun. A new trend you are going to see right now in fix and flip properties is statement making faucets. Instead of buying a builder’s-grade faucet from Home Depot for $20, spend a little more and get a quality, statement-making faucet for say $70 to give the home a higher-end look. The extra $50 won’t break the bank, but it will help your home stand out.

So, next time you are binge-watching Flip or Flop or Fixer Upper, pay attention to the aforementioned tips if you really want to make your flip stand out so that it can sell quickly and help you earn a profit.