Does hard/private money make sense for fix and flip?

[Jereme Chervenak]

Benefits of a hard money loan:

Why would

anyone opt for a hard money loan from a hard money lender instead of

getting a mortgage through a traditional loan from a bank? Because hard

money loans are less of a hassle than those from traditional lenders,

especially when it comes to real estate investments. The flip side? Hard

money loan rates are a little bit higher, and you borrow the money

for only a short period of time (which makes sense).

Hard money lending is popular for the following people:
Flippers:

If a house in comes on the market and it looks like it could be fixed

and flipped in a few months, most borrowers prefer not to go through the

hassle of taking out a 15 to 30 year loan on the property. Instead they

take out a fix-and-flip loan, aka a hard money loan, to buy and

renovate the investment property with an aim to repay the lending party

for the money loan within 1-12 months.
Builders:

Many contractors use hard money to buy a lot, build on it, and then

sell the new real estate and pay off the loan quickly.
Real

estate investors: On occasion, a real estate investor will come across a

great deal on a property that needs to be snapped up quickly. If the

real estate investor doesn’t have the money on hand to snag the asset, a

loan that’s short-term can be fast-tracked by a hard loan lender, who

is, in effect, a real estate investor as well.
People

with credit issues: Borrowers who have cash on hand for a down payment

for what will likely be an owner-occupied home but have been rejected by

a bank for a conventional loan—or have had a foreclosure, default, low

credit score, or other red flags on their credit report, but have some

cash on hand—can use hard money to buy a property that would be

unavailable to them otherwise.