Advantages of Private Money Loans

In 2016, $12.2 billion of the capital invested in fix and flip properties came from financing. That marked a nine-year high. Altogether, nearly a third of all flips in 2016 were completed using some level of financing.

Clearly, investors are realizing that there are many benefits to utilizing private money loans for house flipping. Here are five of the top reasons to consider financing part of your next flip:

• Security

No matter how many house flipping tips you read or how much experience you have, house flipping isn’t without it’s risks. If you invest all of your own capital in a fix and flip property, you’re taking a huge gamble with your financial future, especially if we’re talking about your very first flip.

House flipping loans from a private lender are a practical way to help mediate the risks inherent in property investment. If things end up going terribly wrong, your credit will take a major hit, but you won’t be left destitute if you’ve opted to work with a credible private money lender.

• Strength

The house flipping market is extremely competitive. The investors who are most successful today are those who are able to make cash offers. Top private lenders are able to fund loans in a matter of weeks, sometimes days, and they should be able to offer you pre-approval. The flexibility offered by having capital available is a huge advantage in the current housing market.

• Reach

If you have private capital behind you, doors open. We’re talking about the front doors of rehab houses. Turning to private money in order to help fund your flips gives you flexibility. It allows you to invest in more projects at once, which can be a huge boon. If you can work two projects at the same time, you can often save on material and labor costs by completing similar renovations simultaneously.

More capital can also open up possibilities in higher-end markets. Often the best ROI can be found in luxury flips, but you’ll need plenty of capital to get started. Private money can make each flip you do a bigger success.

• Liquidity

Private money helps ensure that you have the cash flow that you need to complete renovations in a timely fashion. Any good house flipping loan should include funds for expected repairs. With cash on hand, you can avoid unnecessary delays and be prepared if some part of your renovation doesn’t go according to plan. There are always surprises in house flipping, so a cash buffer is a great thing to have.

• Partnership

If you turn to a bank for financing, you’ll likely face long waits and inflexible terms. One of the greatest benefits of working with a private lender is that the terms are negotiable. Any private lender worth their salt wants to work with clients over the long haul. To that end, they should offer better and better loan terms the longer you work with them. This means that with private funding, your risks can go down even further over time, and your profits can go up.