Quote from @Ty Clemmons:
I recently flipped my first property and it was a cash purchase. I want to start flipping houses with hard money loans. I want to get tips on the steps to obtain a hard money loan.
Hi Ty,
Here's what I'd say for advice:
- Understand the loan terms thoroughly. Pay attention to interest rates, fees, loan-to-value ratios, and repayment schedules
- Have a clear exit strategy. Know how you'll repay the loan, whether by selling the property quickly or refinancing with a traditional mortgage.
- Focus on the property's potential value. Hard money lenders are more interested in the after-repair value (ARV) of the property than your personal finances.
- Have some skin in the game. Many hard money lenders require 30-40% of the project costs as a down payment. I only require 10-20%, so let me know if you'd like to also get a quote from me
- Communicate regularly with your lender. Keep them updated on the project's progress, especially if you encounter any unexpected issues or delays.
- Consider using hard money loans as a bridge to longer-term financing if you're planning to keep the property as a rental. DSCR loans are great for that!
Remember, hard money loans are typically short-term (3-18 months), so make sure your flip timeline aligns with the loan terms. Lastly, always have a backup plan in case the project doesn't go as expected.
