Building Wealth with Residential Hard Money Loans You might already know that residential hard money loans are a great way to enter the real estate market in order to build real capital wealth. They are renovation loans that provide financing for distressed real estate for the explicit purpose of renovation.
What you might not know, however, is that there are two very different ways to leverage these kinds of renovation loans. These two methods are commonly known as ‘Fix and Flip’, and ‘Fix and Hold’. You need to choose which method in advance, as it will determine the overall terms and timeline of the loan.
Fix and Flip Loans Fix and flip loans
, also known as ‘house flipping loans’, are what most people imagine when someone mentions residential hard money loans. They are short-term, asset-based loans to purchase distressed residential real estate. Due to the distressed state, this real estate is purchased at a considerable discount. As an asset-based loan, however, the amount financed is equal to the ‘after repair value’ (ARV). For most borrowers, this means that the loan covers the property, the repairs, and even the closing costs.
As the term ‘house flipping loans’ suggests, these loans are designed for quick turnover, aka ‘flipping’. These are not properties you will ultimately hold on to or rent. Instead, your reward comes from the quick and effective refurbishment of these run down properties. Typically the rehab work is outsourced to a professional contractor. But the real key to success, of course, is acquiring a location that is desirable to other real estate investors for immediate acquisition.
Fix and Hold Loans Fix and hold loans
share many of the same residential hard money loan traits as fix and flip loans. There is, however, one major distinction. Unlike typical ‘house flipping loans’, these are properties that you will hold onto as rental property. Yes, that’s right. You still get to finance the acquisition and restoration of a rundown property, but then transition to a traditional mortgage at the after repair value. Fix and hold loans are typically used to acquire property that a conventional lender would not consider due to the distressed condition.
Like fix and flip loans, these renovation loans also close in 10 business days. Unlike fix and flip loans, however, the investor must qualify for conventional financing. This is because the asset-based, residential hard money loan will transition to a traditional mortgage after 6 months.
Which of These 2 Renovation Loans is Right For You?
If you want more information to determine which of these renovation loans is right for you, then contact Noble Mortgage & Investments
today. We specialize in ‘fix and flip loans
‘, ‘fix and hold loans
‘, and ‘conventional real estate financing
‘. Our finance team is standing by to answer your questions and help you get pre-qualified today. You contact us online or call us at [phone].
(713) 680-8100 Two Ways to Leverage Residential Hard Money Loans | Noble Mortgage & Investments, LLC – Texas