Hard Money Facts

Investing in real estate during “unprecedented times” is not for the faint of heart. Nevertheless, savvy, seasoned house flippers recognize that this change in the market presents a great opportunity to outbid and outperform the competition — if you keep moving and adhere to your budget.

Consider this your cheat sheet for saving a bit here and there while renovating during Coronavirus. Little differences in your business practices can make a big impact on your bottom line this year.

1. Don’t Stop Flipping or Renovating

The market goes up and the market goes down. It’s easy to remember when times are good, and harder to remember in the face of uncertainty, especially when your TV and social media channels skew to the negative.

But now is actually a great time to invest, provided you have an ample safety net. If you don’t already know, Residential Capital Partners formed during the 2008 housing crisis — when other lenders were closing their doors. There is no room for panic in house flipping. Invest when others doubt.

People are still buying houses. By this May, demand for housing surpassed pre-COVID-19 levels. Which means you should keep flipping with as much cash as you can muster so you can keep turning a profit. Never let a good crisis go to waste!

2. Choose the Right Property

Buy Properties in Great Locations

Coronavirus may have thrown real estate for a loop, but the golden rule still applies: location, location, location. As always, aim for homes of lesser value in neighborhoods that are seeing an increase in value.

Buy Properties That Need Minimal, High-Return Upgrades

What will get you a better return is updating your kitchens and bathrooms. According to US News, low-end kitchen remodeling in the United States starts at just $4,000. The starting cost of a low-end bathroom makeover is $6,000. That’s pennies compared to large overhaul projects, like wood flooring, a second story or other additions to square footage.

Salvage what you can to keep the character of the home – and save yourself some cash. Opt to paint out-of-date cabinetry, instead of installing new cabinets. See if you can keep existing tile, and replace the toilet, sink, and hardware.  Our rule of thumb: low to moderate repairs wins every time!

The coronavirus outbreak— and the subsequent turbulence of the stock market—has revealed stark differences between private lenders’ customer service models:

1. There are hard money lenders that rely on Wall Street to buy loans they have placed on a warehouse line. They treat loans as transactions.
2. And, there are lenders that have used their own balance sheet to fund loans. They treat loans as relationships.

Did your lender back out of your loan? Are you struggling to get them on the phone? Or get a straight answer to questions when you do? This is a sign your lender uses a transactional business model. This is also a sign that now is the time to find a hard money lender with a relationship business model.

“A lot of our competitors have said they’re relationship partners, and coronavirus was the end of that relationship.”

COVID-19 Reveals the Downfall of the Transactional Business Model

Private lenders with a transactional business model will tout both their customer service and the expedience of their capital, which they may deliver when Wall Street will buy up their loans. But what happens to customer service when the expedient capital goes the way of Wall Street’s fear? It evaporates and the very nature of a “relationship” evaporates with it.

In the words of Paul Jackson, Principal of Residential Capital Partners, “A lot of our competitors have said they’re relationship partners, and coronavirus was the end of that relationship. We want to be the lending partner of choice for our customers in good times and uncertain times.”

Coronavirus has spread across the globe in rapid time, disrupting nearly every industry in its wake. House flipping is no exception. Real estate investors are now forced to navigate new challenges to secure funding. Banks are preoccupied and most hard money or private lenders are either sidelined, denying loans or raising interest rates and cash reserve requirements. The clock is ticking—what do you do?

Take a deep breath. You’ve landed in the right place.

Long before COVID-19 came onto the scene, Residential Capital Partners made the decision to run our business with refreshingly straightforward terms: No money down. 100% funding up to 70% ARV. 10% interest. 3 points rolled into the loan. 9-month term.

We’ve always prided ourselves on our transparency and now, more than ever, investors like you need a lender that can deliver on their promises, so you can keep making progress towards your goals.

So, true to our word, here’s a transparent look at what’s happening in the real estate flipping industry, and what you can expect from us: