When you approach residential Hard Money Lenders in Texas for funding, you’ll need to explain your exit strategy. Develop a plan around one of the three common exit strategies to keep your application moving forward.
There are quite a few contrasts between working with residential Hard Money Lenders in Texas and taking out a conventional loan. One key difference is that the principal is typically due in one lump sum at the end of the term. Although you’ll still make monthly payments, they’ll be smaller and will be interest only. Because of this, you’ll need to map out in advance how you plan out your exit strategy, or how you’ll pay off the balance, before you get funded. There are three main ways to do this, and the right choice will vary based upon your circumstances and investment strategy.
1. Sell the property. If you’re doing a fix-and-flip, selling the property is a natural end. You’ll handle all the repairs, put the home on the market, sell it for a tidy profit, and then pay off the loan.
2. Refinance. More often than not, refinancing is done with the fix-and-hold strategy. The loan is taken out either because the property is in poor condition and won’t qualify for a conventional option or the borrower needs to move faster than a bank loan can get funded. In these cases, the borrower can approach a bank at a later date and get a conventional loan. Sometimes borrowers refi down the line for other reasons too. For example, their credit score may not be good enough for a bank or they might have too much personal debt.
3. Payoff. Occasionally, a borrower has cash tied up in other projects and can’t get it out in time to fund a deal. This happens more often with a seasoned investor who has a larger portfolio and wants to keep growing it. He or she may have another property ready to hit the market a month or two down the line and will pay off the balance using the earnings from the other sale. The funds can come from virtually any source, such as an inheritance or other major payout, but the lending team will want to verify that the payoff plan is a sure bet.
Successful Investors Always Have a Backup Plan
Unexpected delays in a fix-and-flip project or a delay in incoming funds earmarked for a payoff could require you to refinance the loan at some point. Because of this, it’s a good idea to establish refi options at the onset of a project and be prepared to leverage them in the event your final payment to your residential Hard Money Lenders in Texas becomes due before you’re able to cover it.
Continue to evaluate your exit strategy throughout your project.
Even after you get approval from residential Hard Money Lenders in Texas, you’ll need to keep tabs on your exit strategy to ensure it’s still within reach. Monitor your timeline and funding as you move forward and be prepared to pivot when needed, so you can avoid complications and make the most of your venture.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.