Investing in real estate doesn’t only mean buying a property and then immediately selling it or renting it out. There is often something more to it. As all investors know, renovating that property is often one of the most profitable moves in real estate, whether you’re flipping houses or updating that rental in order to increase the long-term value. Here is why renovating is a smart move.
Of course, the renovating has to be financed as well. And, chances are that you won’t have that much money ready and saved, which means that you will have to look for a different solution. To cut right to the chase, it means that you will have to, naturally, think about getting a loan.
What kind of a loan, though? Well, you may have considered the traditional option already, but if you’ve tried to get it, you may have realized that banks are not really keen on financing those renovation projects, and especially so if you need the money quickly, and if the property is not exactly in a good condition, and doesn’t need just a touch-up, but a more serious renovation. Is there anything you can do instead?
You may have come across the idea of getting a hard money loan when investing in real estate in general. And, that may have gotten you thinking. Wondering whether you can actually use this particular loan for your renovation project. So, that is precisely what we are going to be discussing next, meaning that you should keep on reading to find out what you need to know here, and check whether this is a realistic financing option when you want to renovate your investment property.
Here are some important things to consider when it comes to real estate investment in general: https://www.investopedia.com/articles/investing/110614/most-important-factors-investing-real-estate.asp
What Is a Hard Money Loan?
Clearly, before we get to the main question, that is, the question of whether you can use this option for your renovation project, we need to make sure that you understand what a hard money loan is in the first place. And, well, the good thing is that it really isn’t difficult to understand. In the simplest words possible, this is a short term loan that you can get from private lenders, and it is backed by the property you are buying, instead of your credit score, meaning that this score doesn’t play a role in whether you will be approved or not.
One of the biggest reasons why investors go for this particular borrowing option is because it provides them with quick access to the money they need. To be more precise, the entire applying and approval processes can be completed in a matter of days, which is undeniably a great thing, as it allows you to quickly grab an amazing opportunity that has come your way, without having to worry about other investors potentially grabbing it before you do. So, it is this kind of flexibility and speed that makes this option appealing.
Apart from that, it is also appealing because of the fact that no extensive credit check is required, as that implies that you can get approved even if you have a poor credit score, or if you don’t have any credit history at all yet. This allows everyone to join the world of real estate investing, and is especially suitable for beginners, as well as for people that have been rejected by traditional lenders. There is no doubt, of course, that the lenders are assuming greater risks with these loans, and they are protecting themselves through offering slightly higher interest rates than those you may be used to with the traditional mortgages. But, you can still find reasonable and fair options.
Can You Get It for Renovation?
Onto the main question now. You know that you can get this type of a loan when you want to buy an investment property. But, what you want to know is whether you can actually get hard money for renovation, when you want to improve a property in order to either sell it or rent it out at a better price. Since the traditional lenders are hesitant to offer the money for this particular purpose, you may assume that these private ones will be as well.
The good news, though, is that they aren’t. To put it differently, you can undeniably expect those private lenders to provide you with this hard money loan option. So, in simple words, the answer to the above question is yes. Yes, you can get hard money for your renovation project.
How to Get a Good One?
Okay, since you have now understood that using this particular solution to your advantage when you want to renovate is not only possible, but also beneficial, you have another question on your mind. In short, that is the question of how you can get a good hard money loan for yourself. And, well, there is certainly no doubt that you will need to be careful and choose wisely here.
The single most important thing to do here is, of course, choose the right lender. So, focus primarily on that, and search for different ones online, as well as through getting recommendations from other people. Once you have mad that list of potential ones, take your time to research all the lenders in more details before choosing.
For one thing, you should check the actual borrowing terms that they are offering. Because, to benefit from a hard money loan (additional info on both the pros and the cons), you will want to find one that comes with reasonable interest rates, and borrowing terms in general. So, take time to check and compare those.
But then, you will also have to inspect the reputation of the lenders you are considering. This is because you don’t want to wind up working with some shady ones. Take the time you need, therefore, to read some reviews written about the different lenders, and then think about which one could be best for you, while taking into account all the info you’ve found about them, as well as the borrowing terms that they are offering. In the end, make your choice and apply.
