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The great state of Texas is one of the largest state in the union. Briefly part of Mexico, it’s been part of the mainland United States for many decades. The state begins at the shores of the Gulf of Mexico and then into the very heart of the American west. Texas is a place of dreams and a place where people go to find themselves. Many people have found it a good place to relocate from other parts of the country. One of the many attractions of living in this part of the country is that housing prices are somewhat lower than in many other parts of the country. Housing prices in areas such as Dallas, Austin and Houston can be markedly lower than in similar cities in other parts of the country. This leaves plenty of room for people to invest in real estate and earn a good profit from their insights into the local housing markets.
Knowing the Markets
Given the vastness of the state of Texas, there are an incredible number of ways to make money in real estate. Investors can choose to focus on a single suburb, an entire city or set their sights to a much larger area. One possibility is flipping homes. Flippers are people who examine existing housing stocks and look for ways to bring added value to it. Flipping is a good choice for people with the right background, the willingness to work hard and the ability to spot diamonds in the rough that others might miss. A flipper can often have a brief tour of an apartment or house and realize exactly what they’ll need to get done to improve it for buyers. While some people have this kind of vision and understanding of the Texas housing markets, they may not have what they really need to make it a reality.
That certain something is the money. In a low cost real estate market such as Texas, it can take smaller sums of cash to bring in an impressive rate of return. Residents of Texas who want to take full advantages of the possibilities inherent in the markets hear should think carefully. Many will be surprised and delighted to discover that they have more sources of funding. They’ll also be delighted to realize that Texas fix and flip loans are available that can get them started on the path to a lucrative form of income.
Forms of Funding
Many different types of funding exist for the potential flipper. A flipper can look around at the people they know. Many people move here from other parts of the country. New residents may open to considering investing in more real estate with the help of an experienced guide. If people can make a case for a possibly high rate of return, they’ll be able to find people with extra cash to follow them. Flippers with help from an appraiser as well as a qualified contractor can quickly assemble a series of numbers to indicate exactly how to make money from taking properties and making some basic, often low cost changes.
Another source of funding for fix and flip money are from people who already own homes in Texas but lack the understanding of local markets. A skilled flipper can develop a plan to indicate to them what they need to get done and why. That homeowner can take out loan that uses their existing home equity. The flipper can work closely with the Texas homeowner to create a home that will appeal to a wide range of buyers and get quick offers.
People can also look to other forms of funding. A partner who has the money and the kind of carpentry and plumbing skills needed to make changes can work closely with someone who has an eye for interior decor. One party can concentrate on specifics such as paint, the use of fabric, great lighting and fabulous curb appeal. The other can work with the home’s electrical wiring, remove rotting woods and install an entirely new deck that meets all necessary local building codes. Both parties can benefit once the newly revamped housing is put up for sale.
Sometimes it’s necessary for real estate investors to borrow money fast and without any hassles. They often turn to hard money loans in this scenario, especially when they are unable to qualify for a traditional mortgage loan. Even people with excellent credit and stable income are not guaranteed approval from traditional mortgage lenders. Whether a hard money loan is right for you requires knowledge of how they work and what’s involved. The information below sheds light on the ins and outs of hard money loans.
About Hard Money Loans
Imagine a lender considering more than just your ability to repay a loan when assessing the strength of your application. That’s actually how it works with hard money loans. Hard money lenders provide real estate loans that are made according to the value of your collateral, which is your property. As private investors, hard money lenders have the autonomy to make decisions based on each unique application. They aren’t necessarily required to follow strict guidelines and standards. This method is possible since collateral is involved.
Not all investors need money for the same purpose, so there are different types of hard money loans. For instance, fix-and-flip loans let you buy, fix and flip a property, then pay off the loan. Construction loans are for new construction projects where the real estate developer intends to either refinance or sell as soon as possible Bridge loans can serve different purposes. You can buy a property fast, then resell or refinance it. You can also buy a property before getting a cash down payment from selling a property that you already own.
Aside from the above referenced hard money loan, there’s also the owner-occupied loan that’s less common. In fact, about 90 percent of hard money investors do not offer owner-occupied loans because they are a consumer loan that requires adherence to many regulations, which complicates the lending process. Among other regulations, they would have to satisfy Dodd-Frank requirements to ensure the borrower can repay the loan. If you are interested in an owner-occupied consumer loan, there are a handful of hard money lenders that might be able to help you.
A Closer Look at Hard Money Loans
If you ask real estate investors what they appreciate about hard money loans, they will likely mention the fast and easy application process. Hard money lenders have quick financing turnaround times that can be less than a week. Generally speaking, you will be required to put cash down for a hard money loan and the amount down is often based on the Loan-To-Value (LTV) or After-Repair-Value (ARV) ratio. However, each lender has different requirements.
The terms of hard money loans are extremely short. In fact, the loan period is often 12 months, but could be a few years. During the course of the loan, instead of making equal monthly principal and interest payments, there’s a chance that you’ll make interest only payments. Actually, there are some loans that don’t require any payments until the loan matures, at which point you will make a balloon payment. The balloon payment is comprised of the principal, remaining interest and fees.
Is a Hard Money Loan Right for You?
To determine if a hard money loan is a good option, you’ll need to assess the advantages and disadvantages of this mortgage loan product. Hard money loans have short terms, high interest rates and high fees. They also have little government oversight and could possibly be difficult to refinance. On the flip side, hard money loans provide fast money with flexible terms and not a lot of hassle. Many investors find that the advantages far outweigh the disadvantages, which is why they keep hard money loans in their investment toolbox.