Always Search for the Best Option – Scotsman Guide News

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Real estate investors have more options for financing than ever before. Although most fix-and-flippers use cash to purchase and renovate their investment properties, many use conventional mortgages and hard money loans. Some investors have even turned to a new form of lending that has emerged over the past five years — crowdfunding — which is gaining traction in the residential real estate investment space.Mortgage originators who want to capture a portion of this residential investment market, should search high and low to learn all they can about the various loan products and platforms investors use. Armed with the benefits and drawbacks associated with hard money loans, traditional mortgages and crowdfunding, originators can better advise their investor clients.The supply of distressed housing has dwindled in the past few years, but rising housing prices have kept interest in residential property investment high. And, with low-cost property opportunities diminishing, real estate investors appear to be more willing to seek out various types of financing to purchase and renovate higher-priced properties.More than 53,000 single-family homes and condos were flipped nationwide in the second quarter of 2017 alone for a home-flipping rate of 5.6 percent of second-quarter home sales, according to Attom Data Solutions. The estimated total dollar volume of financing for homes flipped in second-quarter 2017 was $4.4 billion, the highest level since third-quarter 2007, nearly a 10-year high.Although cash has always been king in the real estate investment market, for many real estate entrepreneurs, access to financing is extremely important. More than 35 percent of homes flipped in second-quarter 2017 were purchased with financing, according to Attom. That’s the highest level since third-quarter 2008, or a nearly nine-year high.Hard moneyDespite rising awareness and acceptance of hard money loans thanks to popular home- renovation TV shows such as HGTV’s “Flip or Flop,” short-term hard money loans haven’t really changed all that much over the years. These private-lender offerings still provide several key benefits for fix-and-flippers that mortgage originators should bring to the attention of their real estate investor clients.First of all, hard money lenders are knowledgeable. Many specialize in the single-family and residential real estate market and are geographically focused, so their knowledge of the local market and their understanding of a real estate investor’s needs in that particular market is generally strong.Second, they lend based on an asset’s value and not an individual’s credit score or credit history. That means a credit “ding,” such as a past bankruptcy or a less-than-perfect credit score, won’t hurt an investor client’s chances of getting funding if the hard money lender the originator works with determines the property being purchased is a good risk. Short-term hard money loans haven’t really changed all that much over the years.

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