Many people dream of getting into real estate so they can start bringing a little TLC to some run-down, unloved homes. After all, why build new when you already have the bones of a good house?
It’s a nice dream, and it works out well for many investors, but turning house renovation into a full-time source of income is not always as simple as it seems.
You might have the right skills, you might have good credit, and you might even have a decent real estate portfolio, but even with all that, there’s one challenge many new investors often struggle to overcome: securing a loan.
Reluctant Banks
If there’s one thing every real estate investor knows, it’s that banks don’t want to take risks.
As a matter of fact, banks are sometimes so risk-averse that they will be unwilling to invest in you no matter how solid your financials are.
That’s not to say banks never give out loans.
Traditional mortgages and investments are, of course, where they make most of their money, but renovations are another matter.
Renovations take time. Renovations require a level of trust in the people hired to carry out the work.
In other words, as far as banks are concerned, renovations are a risk.
All this to say that, depending on the state of the house, a traditional bank is only going to back you so far, and they’ll ask for a lot of up-front work before they even consider you.
But what about hard money loans?
Faster Deals with Hard Money Lending
Hard money lenders don’t waste time.
They know the difference between an experienced investor and a potential liability, and they won’t make you bend over backward to prove that they’re getting a good deal.
As a result, hard money deals can close much faster. That means that if you’ve got the momentum going with the seller, or else if you’re eager to get started with the work, the lender won’t slow you down by placing unnecessary barriers in your way.
Hard Money Loans Mean a Better Experience
The other major benefit to hard money lenders when it comes to house renovation is experience. It’s all well and good for a bank to ask about your real estate portfolio, but while you’re at it, you might want to consider theirs.
Banks invest in all kinds of different ventures and businesses with a very hands-off, spreadsheet-driven approach.
That’s not to say hard money lenders don’t know their numbers, but that they also understand how things work in practice. Hard money lenders have far more direct experience in the real estate market, and they put that to good use, working with clients to make a better deal for everyone involved.
At the end of the day, it’s vitally important that you trust the people you’re working with. A traditional bank will always offer you the deal that’s best for them. With hard money, on the other hand, you can place your trust in people who know how to close a deal that benefits everyone involved.
