Does The Market Need Hard Money Lenders for Wholesaling Houses?
Do real estate investors really need hard money lenders for wholesaling houses anymore? Does the market even support room for hard money lenders to be profitable today or have they become irrelevant?
Hard money lenders have been trying to make a big push back into the market over the last few months. They are increasing advertising and pushing for investors to apply for financing and are beginning to feel the heat from their own competition as the hunger to returns and a slice of the new rebound grows. However, they certainly have their work cut out for them after significant tightening in criteria and shunning their best consumers over the last five years.
Real estate wholesalers and others flipping houses relied heavily on hard money loans during the last boom. Then as the market and home values disintegrated hard money lenders wound up tightening underwriting to almost conventional standards and becoming incredibly difficult to work with, while still demanding high rates and fees.
This spurred innovation and many alternatives out of necessity. In most cases it could be argued hard money is no longer needed or the best option, at least in the format it has been offered recently. Now we have transactional funding and crowdfunding as well as more opportunities for negotiating owner financing.
Hard money lenders really aren’t helping themselves with terms and conditions either, and is still unlike hard money of the past, when you could get 100% financing with just a pulse. When they are delivering what is really valuable to investors, easily and at a reasonable rate then they will be in demand again. Sadly many won’t learn fast enough. They might make a killing on the spread of deals they do, but many won’t see the loan volume anticipated unless they switch it up.
Hard money can be incredibly valuable, even at 14% interest and several points. However, perhaps what is more important is ease of process, speed and taking out the guess work providing confidence in funding and fast cash.
This is achievable for wholesalers today if you build relationships and develop a good track record with today’s hard money lenders.
For those newer to the game, while keeping an eye on hard money is good there may be other options which are more appealing and offer faster funding. So for those wholesaling houses don’t be too frustrated if hard money doesn’t come easily yet, look into other options and build a portfolio of deals to showcase your expertise.
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