If you’re just getting started in the world of house flipping, you’re probably looking at all of your options for how to make money in real estate. You’ve probably read a good bit about real estate business loans, and you might be wondering how you’re going to get the financing for your first deal.
As you know, the kind of loan you’ll get to buy investment properties is pretty different from the kind of loan you’d get for a mortgage. The interest rates are almost always going to be much higher than if you were applying for a mortgage loan, and approval is usually not based on your personal credit history. In fact, most private lenders and hard money lenders don’t care at all about your personal credit—they care about the value of the property they’re funding.
As you look into these loans, I want you to keep a few things in mind that will help you get approved every single time, even if you have terrible credit and you’ve never done a real estate deal in your life.
Have Your Numbers Locked Down
Private lenders, investing partners, and hard money lenders have one thing in common—they all want to see a return on their investment. That means you need to show them what they’ll get if they approve your loan. In order to do that, you need to know how much your property is going to be worth when you’re done and what it’s going to take to get it there.
If you can show your lenders that you have a property with an after-repair value (ARV) of $500,000, and you’ll only need $250,000 to buy and rehab it, they’re going to be interested. Don’t just come up with those attractive numbers on your own, though. You don’t want to ask for too little and then run out of funding. Do your research, and give a good estimate on expenses, and you’ll be more likely to get the real estate business loans you’re looking for.
A lot of hard money lenders are going to have their applications online, but some of them still work on an in-person basis. And most of the investors and private lenders you work with are going to be people you meet in real life. It might not be fair, but lenders are more likely to work with people they like, so always be polite and friendly. The more likeable you are, the more money you’re going to see.
Bring Backup Research
Don’t just research the property you’re fixing up. Research the neighborhood and everything else about the area that will make it an attractive place to move. That’ll show your lenders that this really is a great investment and that you’ve done all of your homework and are serious about this project.
The more deals you make and the more successful real estate business loans you pay back, the more lenders and investors will want to work with you. A good track record speaks for itself, and if you follow these tips you’ll see how to make money in real estate faster than you might’ve thought possible. Before you know it, you’ll be on the other side of the table funding some young house flipper’s first deal. Having that kind of investment capital on hand really isn’t that far out of reach if you start now and work consistently to build your reputation and your business.