Tim Bell explains why traditional banks like Bank of America and Wells Fargo don't work for fix-and-flip projects. Hard-money lenders finance short-term renovations in 6 to 12 months and close faster with better terms. Search online, check local real estate clubs, or try Fund That Flip.
Now the next one on our list is hard money lenders. Okay, let me show you. There are several different ideas or concepts about hard money lenders. A hard money lender is a niche lender. A hard money lender focuses on properties that need work, properties that are not owner occupied and properties that you're going to own it for a short period of time. Okay, so over here we have what we would call the traditional lenders. We have bank of America, we have Wells Fargo, we have PNC Mortgage and Deutsche bank and US bank and all those traditional long term owner occupied lenders that we're all familiar with. That's where we have our mortgages, most of us. Right. Okay. Now these folks typically will not loan you money for a fix and flip. I mean let's think about it. What do these folks want? They want you to live in the property. They want it to be owner occupied. They want you to borrow the money for a long period of time, typically 25, 30 years, something like that. And they want the property to be in beautiful appraisal condition. They want it to be in good shape. Well, let's think about our fix and flip properties. Number one, are you going to own it for 30 years? No. Six months max. May be a little bit longer than that. But ideally on a fix and flip you don't want to go any longer than about six to seven to eight months. That's the longest you should go. So that that doesn't fit their qualification of a 30 year fixed rate loan. Also, are you, they want you to be owner occupied. Are you going to move into your fix and flip house? Not if you want to stay married. Why? Because as soon as you condemn the kitchen, your spouse is going to say woohoo, we're going out to dinner every meal. But then when you get done with the kitchen and you tell that nice young lady that she has to go down to the Chevron station to use the bathroom from now on, that's going to be it. The foot's going to go down. No more living in our fix and flip houses. Okay, so you're not going to live in the house. Now the other requirement that those long term traditional mortgage lenders have is that you that the house be in beautiful appraisal, pretty condition. Well, wait a minute. Is a fix and flip in beautiful pretty appraisal condition? The answer is no, of course it's not. Why are you doing it if it is? There's no profit to be made. Somebody else has sucked all the profit out of it. So basically our Fix and flip properties don't qualify for these folks. Financing bank of America, US bank, all those people, we're not going to live in it, we're not going to borrow the money long term. And it's not beautiful and pretty and appraisal. It's nasty, stinky, ugly and rugged out. Nasty, stinky, ugly and run down. It's bad. Okay, so we've got to find a specialized lender to loan us money for our fix and flip properties. And that's where we come. Over here. Over here we have the hard money lenders. Hard money lenders loan short term, typically six to 12 months max. They loan on non owner occupied properties, which means you don't have to live there. And they loan on nasty, ugly, rundown, beat up and stinky properties. That's their niche, that's what they like to do. Those are the people we're talking about. So if you go to bank of America, Wells Fargo, PNC Mortgage, Chase Bank, Deutsche Bank, US bank, all those people and ask them for a fix and flip mortgage, when they get done laughing, they're going to say no, we don't provide those kind of mortgages. Okay, you've got to go to a specialized niche lender, like a hard money lender. Okay, so let's talk about hard money lenders. Now. One of the hard money lenders that I like is called Fund that Flip. Let me just show you what their website looks like here. What did I do with it? Let's see, Fund the Flip. Okay. And Fund that Flip started out on the the east coast. They're still based in New York but they will do, they do hard money lending throughout most of the United States. So I do recommend this company, Fund that Flip. John Andrews is a friend of mine. He's one of the people that works with this company that's done a great job. And if you contact them and they will work with you, okay, this can be a good company to work with. And another thing too, there's lots and of lots, lots and lots of hard money lenders. Another place where you can go is an online search. Do a Google search for hard money lenders, you'll be amazed at how many you'll find. Okay, check them out. Another one. The real estate investment club. Again, just like contractors and real estate agents and title people, a lot of times hard money lenders will hang out at the local real estate investment club wanting to meet you. That's why they're there. So go there, check them out, they may be there. If nothing else, ask the president, owner, operator of the club and or the other investors there who they use for a hard money lender. In many cases they will share a good local hard money lender with you or a good national hard money lender with you. And then of course the last one on our list here is local lenders. I actually really like local hard money lenders. Why? Because I find that their terms are often much better than than national hard money lenders. They typically have lower interest rates, they typically have lower points, which we'll talk about what those are in a minute. They often have lower fees and most importantly in many cases they can get the loan closed faster for you because their due diligence process is actually much shorter than a national lender. Okay, so again I do like local hard money lenders. Go to your real estate investment club, look them up online, find local lenders. They can be very, very helpful for you.
