What’s the Difference Between Fix & Flip Hard-Money Loan and a Conventional Loan?
Whether you’ve bought your house for the price of a car or paid several hundred thousand dollars for it, becoming a brand new homeowner makes you feel like a million bucks. Becoming a real estate investor, once the province of the rich and famous, has opened up to the every-man, with dozens of avenues for getting a toehold as a buy-and-hold or buy-and-flip property owner. But first, a few definitions. What Exactly is a Fix & Flip Investment? The term ‘Fix& Flip’ real estate gained traction in everyday vocabulary beginning in the late 1980s. In the grip of an economic recession and surging home foreclosures (repeated 20 years later with the Great Recession), investors bought, rehabbed, and sold foreclosed properties, thus birthing the notion of ‘flipping’ or improving and selling a property quickly as a normal business practice. Properties ripe for fix & flip are those that offer a large and quick payoff potential. For instance, a house that is structurally sound but several years past its prime on the paint, flooring, appliance, and overall maintenance fronts. Such a house that requires a maintenance overhaul but isn’t a complete gut-job offers two key benefits. First is that the house can be improved quickly— a quick turnaround minimizes the risk that as weeks turn to months, the housing market suddenly sours. Second is that a maintenance overhaul, while expensive, costs tens of thousands of dollars less than a gut job, as major overhauls almost always involve a brand new roof and heating/ventilation system along with significant wiring and plumbing upgrades. Best Sources for Fix & Flips One strategy that is growing in popularity is purchasing a property that is old, under-maintained, or abandoned, followed by renovating it and then renting it out, either as a long-term rental or as a short-term Airbnb. Four Big Differences Between Hard Money Loans and Conventional Loans One way to differentiate hard money loans from conventional loans is to think about their purpose. Conventional loans are taken out to finance the residence that you will live in a long time— your primary residence. As such, the duration of a conventional loan is typically 15 years or 30 years, and the interest rate is relatively low as lenders believe that you are likely to prioritize payment of bills relating to your home-sweet home. Conversely, Fix & Flip loans are short-term in nature, funded by investors who expect a quick profit realized within months or a handful of years. Likewise, particularly for fix & flip investments, the ownership horizon itself will only be months or a year or so until the property is sold at its now higher, rehabbed value. beylikdüzü escort bayan, gaziantep escort, ataköy escort, esenyurt escort, seks hikayesi, kayseri escort, şişli escort, beylikdüzü escort, beylikdüzü escort A second difference is who the lender is. Conventional loans are generally provided or guaranteed by government-backed mortgage lenders such as Fannie Mae and Freddie Mac. Fix & Flip or hard money loans, however, receive no such cushion and are backed strictly by individuals or private sector entities. And each lender provides its unique set of benefits and trade-offs. Conventional mortgages are long-term and low-priced but require reasonably strong personal credit. Hard money loans can be provided quickly with no credit check but must be repaid quickly and at a relatively high-interest rate. A third difference is the eligibility requirement. All financial good deeds and skeletons alike come tumbling out when a conventional loan is provided, due to the stringent regulations and requirements that banks must abide by. Private money lenders face few restrictions and thus are not required to validate your creditworthiness. Their chief concern will be the value of the property that is securing the loan. Lastly is the time to complete the loan process. Conventional loans may take one to three months to complete, while fix & flip loans can be wrapped up in a few days. Read our other blogs: Click Here Follow us: MySmartCousin
Community Development Block Grants (CDBG), a Gateway to Affordable Housing
The development of its citizens is the surest path to the development of a country. People who are homeless or who cannot afford to purchase a home can become property owners through a little-known program sponsored by the U.S. Housing and Urban Development Agency (HUD), the Community Development Block Grants program (CDBG). HUD’s CDBG program, established in 1974, was created to provide a path to homeownership for low and moderate-income families. Under the program, states, cities, and counties are able to apply for grants annually to revitalize housing stock and infrastructure in their communities. Eligible activities under the CDBG program Funds provided through CDBG grants support housing-related activities including housing repairs and rehabilitation, down payment assistance and closing costs, and the purchase or construction of rental housing or owner-occupied housing. Housing counseling and relocation assistance are also provided to help aspiring owners in their home buying journey. You can read my recent blog here: Click Here
Ring in Mo’ Money This New Year
Ring in Mo’ Money This New Year Nothing keeps your head more in a spin than out-of-control finances. Since most of us didn’t grow up with banker parents teaching us the ins and outs of budgeting, make this your year of earning your ‘3M’ degree— your ‘Masters in Making Money’. Your first class?— the Envelope System. ‘Cause Money Don’t Grow on Trees The cheapest car is the one you already own. Same with money, the quickest dollar is the one already in your pocket. Grandma was on to something when she used different coffee cans to stash away money. The envelope system works the same way. The Envelope What? The envelope system is as old as the hills, but the need is even more critical in our credit/debit card society where money goes so quick, you’re not entirely sure you ever earned it. The envelope system forces you to put your hard-earned coins on the table and parcel them out to different envelopes or spending needs. Prime categories for envelopes are required expenses that leave you scrambling every month— I see you car payments, rent and light bill— and non-critical stuff that eats a hole in your wallet— cigarettes, eating out, shopping. An Example Let’s say you take home $700 a week, after Uncle Sam gets his cut, and you spend your money on five main things: groceries, rent, car (including the note/gas/repairs), utilities and hanging out. Your $700 a week, or $2,800 a month, is going to get divided into 5 envelopes. If your rent is $1,000 a month, then each week you’re going to put $250 in the Rent envelope. If you spend $100 a week on groceries, then you’ll put $100 every week in the Groceries envelope. And so on. Your envelopes will serve two purposes: first, they’ll help you really see where your money is going. No longer will money run through your fingers without a trace— you will have to physically carry the Grocery envelope to the store, open it to pay for groceries, and put the change back in the Grocery envelope. If you get to the supermarket and realize you forgot the Grocery envelope, guess what, no groceries for you, it’s back home you go to get the envelope. Second, the envelopes discipline your spending. So let’s say you’re midway through the month and your cousin says it’s been a minute since y’all have gotten together, and to come to the movies with her tonight. Checking your Hang Out envelope and seeing only a couple of singles, you realize, not unless the movie is playing on television, you can’t do it. But then you spy the Rent envelope and see it fat with $500 in it. Two words: back…off… No money, I mean no money, comes out of an envelope to pay for anything other than what’s written on it. In other words, no two-timing between envelopes. When money in an envelope is gone, it is gone. Leftover Money So you arrive at the end of the week, look at your Groceries envelope and what do you know, there’s still some money left. Cool beans, you’re under budget! Your options? Reward yourself, within reason, but enjoy your budgeting success. Rewarding yourself for a budgeting job well done helps you feel not just pain, but also pleasure from the process. Next Steps Start now! Gather your envelopes, get a pen, and get started with your 3M degree!