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Hard Money Loans: Your Secret House-Flipping Weapon

Home flipping is one of the most lucrative ways to bolster your investment portfolio. With the right loan, anyone can foray into real estate investment. Real estate investment is so attractive for potential diversification, passive cash flow, tax advantages, and stable cash flow. As this is an incredibly attractive opportunity for new and seasoned investors alike, finding the right loan to secure a property for renovation is the secret to house-flipping success.


What is a Hard Money Loan?


Hard Money Loans are a quick, easy way to raise capital for real estate investment projects. Capital can be applied to renovations, wages for workers, purchasing property, long-term refinance options, etc.


There are a few characteristics that define a hard money loan versus a conventional loan. Here are a few factors to keep in mind:

  • Property As Collateral: Unlike a traditional loan, hard money loan lenders rely on property as collateral for the loan. This means that a lender will rely less on a borrower’s financial history, but rather on the asset of the property itself. This opens up lending options for borrowers without a resounding personal financial history.
  • Repayment Period: Unlike the conventional 30-year loan form, hard money loans normally have a much shorter repayment period. Typical repayment periods for hard money loans range from 3 to 5 years in comparison with traditional loans.
  • Rates: Since lenders take higher risks for hard money loans, interest rates are higher than most loan forms. Higher rates ensure that borrowers can secure loans with greater ease, and pay off the loan on an accelerated timeline.


How Can It Help My Real Estate Investment?


The flexible underwriting of this loan form, accompanied by the shorter repayment period and lesser background check requirements all contribute to the ease of managing a hard money loan. Read below for specifics on how a hard money loan may suit your borrowing needs.




One form of hard money lending is owner-occupied, where the borrower is planning to reside in the property for at least a year. Owner-occupied loans may also look like residing in the property, while also leasing part of the property out to renters for a cash flow. An owner-occupied loan enables a borrower to remodel the home and is potentially easier to obtain as investors factor in the lender residing in the home.




A popular way to foray into real estate investment is house flipping properties that are not occupiable in their current state. These properties are lucrative opportunities as they often can be bought at a low purchase price, which leads to a high ARV, or after-renovation value. The profit turnaround from the initial property purchase price to the renovated property grosses tens of thousands of dollars.


The greatest asset is knowing how to utilize the hard money loan. The real estate market is a quick-moving machine, which means that you are more likely to secure property if you have cash or hard money to show realtors. In certain cases, hard money borrowers may also have access to properties not yet on the market. Wholesalers look for investors to take their properties in a matter of days. Borrowing hard money loans provides this connection and the ability to secure a property in a short period of time. Securing a hard money loan can free up cash flow, enabling borrowers to obtain the capital needed for renovations. These advantages, combined with the overall ease of obtaining a hard money loan compared to other loan forms, are all ways that hard money helps house flippers.


End Game


If you are someone looking to diversify your investment portfolio, hard money loans can be the jump step you need for a successful property investment. While hard money enables you to initially secure renovation properties, the goal is for these properties to turn into passive income once renovated and rented out. Securing the initial hard money loan is what may be the stepping stone to a successful portfolio.


For those looking to secure a hard money loan for house-flipping, finding a reputable funding company that can link borrowers to their loan needs is a great step. JMJ Funding Group has over 28 years of lending experience with 99% customer satisfaction in lending needs.

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