There are many ways to get money for investing in your home foreclosures. In this article, we will discuss the whys and why not’s of using hard money.
There are many ways to get money for investing in your home foreclosures. You can use your own cash, post investor-related ads in the real estate section of your local newspaper, apply for a personal loan, use a credit card (I will discuss this further in another article), take out a mortgage loan, or use a hard money lender. In this article, we will discuss the whys and why not’s of using hard money.
What is a hard money lender? A hard money lender is a certain type of lender that loans money on the future equity of a refurbished property. Unlike conventional lenders, these lenders do not care what the how is presently worth. All they care about is what the house will be worth after it is fixed up and ready to sell.
These lenders make it easier for entrepreneurs with bad credit and/or no money to make investments in home foreclosures.
Some things to know about these lenders:
Here is an example of how a hard money loan would work:
You find a house. Purchase price of $43,000. After repair value of $88,000
You receive a 60% hard money loan of $53,000, leaving $10,000 to do the repairs needed to bring the house up to live-in condition.
You get bids for the work needed. You can do it yourself to save money, but sometimes; there are less headaches and leaves your time free to look for more deals if you have someone else do the work.
So, you get bids.
Bids: Contractor A: $12,000
Contractor B: $9,000
Local handyman: 100 hours x $20/hr. = $2,000 + Materials, $2,500 =$4,500
You choose contractor B. You decide that you do not want to do the work yourself or have to supervise a handyman. Your time is better spent searching for new investments. Now, you ask, how do you pay the contractor? Easy. When the work is completed the hard money lender will send out an appraiser to make sure the work is done. When he verifies that the work is done, the hard money lender will cut a check for the contractor. It is that easy.
Using hard money is how people with bad credit and no money make fortunes in real estate investing.
KimberlyAnn
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