Busting Myths: How to Get Out of Hard Money FAST
Today, we’re going to bust another myth, and show you how to get out of a hard money loan FAST.
So many real estate investors believe hard money is a trap.
This is false!
In fact, many investors think hard money is a profit death sentence.
Again, this is FALSE.
Here’s the truth: Hard money loans should only be used as temporary solutions for your value-add properties. They’re not meant to be long-term options. If you enter a hard money loan with a long-term mindset, then yeah, you’ll probably lose most (or all) of your profits.
So, what can you do to ensure you’re in and out of a hard money loan fast? Here are 3 tips:
Make a plan to exit your loan as quickly as possible.
Don’t walk into your loan without a plan to get out of it.
If you’re doing a fix and flip, then make sure you have everything scheduled and set so you can get the work done and sell the property ASAP.
If you’re looking at fixing and holding (aka, rental property), then make sure you line up a long-term loan (aka, a traditional or bank loan) alongside your hard money loan. Don’t wait until you’ve completed the renovation portion of the project to start the refinance process.
If you work with the right lender, you can get help creating your specific plan, and get help with both your hard money AND long-term loan.
Focus on your credit score.
If you want to refinance out of your hard money loan quickly, then you’ll need to make sure you have a good credit score.
What is a good score? Ideally, you want it to be above 640. But that’s the bare minimum. Aiming for 670 or higher is even better.
If your credit score is below 640, then take the time to raise it before you get a hard money loan. Otherwise, you’ll likely get stuck because there aren’t many—if any—real estate lenders who can help you refinance with such a low score.
If you need tips on raising your score, check out some of our other videos on our YouTube channel.
Don’t delay construction.
Sometimes real estate investors close their deal with a hard money loan and then…sit. They don’t jump straight into the project and get things moving. Or they get started, but then hit a bump in the road and delay things.
Don’t do this.
The faster you get your work done, the faster you can sell or rent the investment property. Which means you can get out of your pricey loan a lot faster.
A great way to stay on track is through the Flipper Force app.
Listen, a hard money loan isn’t an expensive trap. It only becomes an expensive trap because real estate investors don’t go into it prepared.
If you need help preparing before you commit to a hard money loan, then our team is always here to help.
Stay tuned for our next video where we talk about bank lines compared to hard money loans. Believe it or not, bank lines aren’t always the cheaper path to take.