If you want to get into investing in real estate, bank after bank might deny your application and Texas Hard Money Loans might be your only option, but what’s the best way to use these loans?
Hard money is asset-based rather than credit based so it is easier to qualify for, especially for first-time investors who might be in tricky financial situations.
That doesn’t mean hard money is cheap. Usually, these loans entail a double-digit interest rate, so you should pay them back quickly. Now think, what type of real-estate investment involves a quick turnaround?
You guessed it, house flips.
If you’ve binged watched HGTV, you probably know how flipping works in a fundamental sense.
1. You buy undervalued home
2. You rehab it and raise its value
3. Then you re-sell it for a profit.
Using hard money to flip houses offers many benefits, the main one being the potential for huge profits.
A single solid flip can pay off a boatload of personal debt. The average profit of a flip stands at about 30 K, so imagine how many credit cards you could pay off from just one successful hard money deal.
But there’s another side if you chose to “flip,” the coin.
Unless you’re Bernie Madoff, earning 30,000 dollars from any investment is going to take a lot of time and effort. Rehabbing a house is time-consuming, to say the least. If you have a full-time job, you might end up showing up to work the next morning covered in paint from the night before, or you might even have to quit your job.
But there is a less involved way to use hard money to invest in real estate.
There’s another approach to flipping called wholesaling. Here’s how wholesaling works:
1. Finance and close on an undervalued property
2. After you have the property under contract
3. You sell it to a flipper who has the time and money to turn it around
Think of wholesaling as flipping without all the blood, sweat and tears of a full-blown rehab project. A single wholesale can close in a matter of a weeks, and you probably won’t have to quit your job.
Wholesaling takes less time and money up-front, so it is not as risky as a flip, but you’ll also make less money in the end. The average profit on a wholesale deal is around 10 K which is nothing to sneeze at, but it is far less than you can earn from a flip.
So if you’re a first-time real estate investor wondering what the best way to use hard money is, know that:
• A single flip can earn you a lot of money but, it will also take a lot of time, and effort on your part.
• Wholesaling will earn you a decent profit, and will take you far less time but you’ll also make less money in the end.
There are no right or wrong answers here, the best way to use hard money will depend on your financial goals and your specific situation.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters and 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.