Pros and Cons of Hard Money Loans

real estate investment hard money loans tx

What are Hard Money Loans?

Hard Money Loans are short-term real estate investment loans for the purpose of repairing a distressed property for quick sale on the market.  Others also call them fix and flip loan, as in house flipping. You can use these loans to quickly purchase, repair, and sell the property at a profit.

Before you start with your hard money loan, we recommend you learn the pros and cons of hard money loans. The more you know, the better your investment will be. Get ahead of the game before going in blind.

Pros:

  1. Easy to Start

    If you’re just jumping into the whole real state thing, a hard money loan is a great way to start out. They’re great for anyone to get involved with real estate investment.

  2. High Loan Value

    Instead of your credit worthiness, your hard money loan value is determined by the ARV, After Repair Value, of the distressed property. The proposed rehab will determine the ultimate value of the loan.

  3. Includes Closing Costs

    Hard money loans often includes real estate closing costs.

  4. Quick Process

    You can close a hard money loan in as little as 10 days. That’s nice, especially if you want to invest quickly.

  5. Less Rigid

    The terms may be open to negotiation. Also nice, especially if you need a leg up to get in the game.

  6. High Approval Rate

    Collateral (value of the property) is more important than a credit score (likeliness to repay loan). This tends to produce a higher approval rate than a traditional mortgage.

  7. Pay as You Go

    You only start paying interest on money drawn from a loan as work is completed, meaning you can take it at your own pace.

  8. Multi-Tasking

    More experienced investors can flip more than one house at a time. With a large enough loan, you can purchase multiple properties and repair them before putting them back on the market.

Cons:

  1. You Need Skills

    Investors need to be well-organized and talented at spotting good real estate opportunities. Once you’re able to keep your rehab on time and under budget, you’ll quickly be on your way to enjoying the fruits of your real estate investment.

  2. High Interest

    Hard money loans have a high interest rates. Fortunately, this encourages efficient repair and a quick sell.

  3. Speed

    Repairs typically need to be complete within the first 60 days. This can be challenging if you have multiple properties to work on. If this is you, you may want to consider bringing on a partner to help fix and flip multiple properties at the same time.

  4. Cash on Hand

    Repair work must pass inspection before you can draw reimbursement from loan, so you’ll need some cash reserves on hand.

Contact Noble Money for Your Hard Money Loans

In case you didn’t notice, the pros of successfully managing a hard money loan outweigh the cons. If you’re ready to start in on a real estate investment, contact Noble Mortgage & Investments. We’ve been lending in Texas since 2003. Call us today at (713) 680-8100 to discuss your financing needs. Or pre-qualify online to start on your project ASAP. Get the loans you need with Noble Mortgage & Investments and start your real estate investment today!

Pros and Cons of Hard Money Loans | Noble Mortgage & Investments, TX



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