If you’re in the business of house flipping and churning a profit with your hard money loans, then these hard money investment tips will definitely the help you out.
How to Know if a Hard Money Investment is Right For You
Getting approved for a hard money loan only usually requires you to have assets you can offer up as collateral to your private money lender, but there are some things you need to consider before taking on a hard money loan.
Prepare yourself for a short term loan. hard money investment loans are always short term loans that can require you to pay back the loan within 3 months or up to 3 years. This really depends on who your private money lender is and how your hard money loan is structured.
That being said, if you don’t have the cash on hand to fork over within the given deadlines of the loan, and you assume you can pay it back by flipping your newly acquired property in that time frame, then you are probably taking on a huge risk. The house flipping market can be extremely lucrative at times, but it can be very unforgiving too, so it is not advisable to take on any type of short term hard money loan if you have any reservations about being able to pay the money back.
Make Sure Your Hard Money Investment is Profitable
When you are choosing a hard money lender, chances are you already have a property you want to flip in mind and finding a property is actually the easy part, but have you considered if the property will actually provide you with a good return on investment?
Is Your Chosen Hard Money Investment Property in a Prime Location?
We have touched on this topic a little bit in our previous articles, but you always need to ask yourself if the property you are looking at is in a good location before taking on any house flipping project. Keep this tip in mind regardless of what state you choose for your next flip, because it works. Let’s break this idea down even further and elaborate on why this question is so important.
What is The Median Income in The Area Surrounding Your Prospective Property?
If you decided to pick a hard money investment property in a low income area due to an extremely low price, then you are probably going to be in for a big surprise. Your property will probably never sell for what you expect and it really won’t make any sense to provide massive upgrades to the property that could make it significantly more expensive than the average home for that particular area.
The same rule applies if you decide to pick an extremely high income area. If you purchase a home that extremely expensive, then you are also usually looking at extremely high upgrade costs. However, if you can find a home in one of these areas for a great price and decide the home improvements are somewhat manageable as far as costs go, then investing in a property in a high income area could make sense.
Consider Your Hard Money Investment Home Improvements Before You Buy Your Next Property
After figuring out your ideal location for your hard money investment property, you should start thinking about what home improvements would make the most sense for that specific property. However, we recommend that you hire a home inspector to help you do your due diligence before you start making aesthetic upgrades. Doing this could potentially act as a safe guard in case you find out that your new investment property has other unexpected expenses such as faulty plumbing or electrical problems. Problems like these can sometimes put you over your expected budget which could definitely cause problems for your bottom line.
If you find out your hard money investment property has no known issues, then it also may be a good idea to do another walk through of the home to see what could use the most TLC. For example, if you notice that the kitchen comes equipped with cheap tiles that look like they have been around since the dark ages, then you might want to consider replacing those first.
Since we are on the topic of kitchens, be sure to also look at the cabinetry in the kitchen itself and decide if it looks presentable or if those could use an upgrade, too. We hope you enjoyed this week’s hard money investment tips and we encourage you to visit us weekly for more great information and guides about hard money investments.