How Hard Money Lenders Can Help Your House Flipping Business Grow

How Hard Money Lenders Can Help Your House Flipping Business Grow

If your idea of a successful house flipping investor is someone with millions of dollars on hand to fund dozens of fix & flip projects per year, you might be astounded to know that sort of capital liquidity is exceptional. Booming house flippers usually have most of their own wealth engaged in more than one project at once, and as they grow their real estate investing footprint with more & more projects, they often collaborate with hard money lenders in California for fix and flip loans to finance their deals.

Hard money lenders aid house flippers leverage their wealth: Usually, new fix & flip investors are under the apprehension that incorporating loan fees & interest payments to the cost column in their house flipping business plan will only adversely affect their Return on Investment. This could be true in some events, particularly if you’re weighing ROI on a per-project basis for just a small number of house flips. Nonetheless, depending entirely on your own wealth reserves to build your house flipping business means your organization’s growth path will be slowed drastically, and your overall ROI will be lower significantly since you’ll be restricting the number of deals finished.

For instance: Let’s say you’ve capital assets of $300, 000 and in your market, you can buy 2 fix & flip properties this year.

After costs, you apprehend a 20 percent of net return of $60,000 in profit. Now you’ve $360,000 in capital assets. The subsequent year you invest your $360,000 in 2 more projects and get a 25 percent net return of $90,000, meaning you then have $450,000 to invest the succeeding year. And so on…

This business growth tactic can work for you if you’ve the desire and patience to expand your house flipping business more slowly.

Borrowed money can offer more flexibility to a house flipping business: To expand your house flipping business faster, another alternative could be to leverage your $450,000 with borrowed capital from a California hard money lender. Let’s say you borrowed $1.25 million, presenting you the means & the flexibility to compete for deals, and with your $1.25 million you can now buy 8 homes. Taking your loan costs into consideration, your usual per project ROI may come down a couple of percentage points, but your cash on cash ROI will increase drastically – meaning your own money toils harder for you when leveraged with borrowed capital.

Another advantage of employing borrowed money from a hard money lender in California is that you can maintain your cash reserves in case of operating expenses you didn’t see coming.