The practice of “flipping real estate,” that is, to buy a property with a priority put towards renovation or some other means of increasing its value for quick, profitable resale, requires a combination of different skills. You need to have a good understanding of how the market moves in a particular area, a sense of finance for judging how much money you can spend on a property and still sell at a profit, and, perhaps most important of all, you need the funds to ensure that your projects go quickly and smoothly. This is especially true if you’re working areas with a lot of demand and rising prices that may not continue to inflate as quickly as they are now. Real estate bubbles may be bad for buyers, but for sellers, they are major opportunities.
A hard money loan is an ideal financial tool for people thinking about flipping real estate. One of the biggest advantages to a hard money loan is that it cuts through much of the red tape and bureaucracy that slows down the approval process of a traditional bank loan. Of course, this also means higher interest rates and more points, but the increased costs can definitely be swallowed by a continued, successful series of business transactions. You can propose a loan based not on your credit rating but the profit potential of the project.
This, combined with the speed of approval, lets you take advantage of market trends. There’s also a bit more flexibility on the terms of the loan, so things like payment schedule are more open to negotiation. For a business person that has run the numbers and knows that there’s a good deal in the making, but not enough finances to get a project off the ground, a hard money loan is a great platform to get things started.