Hard Money Loans in the D.C. Area: Should You Do It?

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Although the Standard & Poor’s Case-Shiller report stated that housing prices were up 24 percent in 19 cities (including D.C.) from the year before the report was released, the Washington Post recently suggested that we might be in a “calm before the storm” scenario as far as shopping for a house in certain parts of the Washington D.C. area. Although the average home in D.C. is still a pricey $411,000, and the prices aren’t going down, they’re not going up either. Interest rates remain low, so many people are looking to snatch up a home before the prices take a drastic turn upward again.

There are also an abundance of homes available for purchase. In August of 2015, there were 12,329 homes on the market, with 5,796 new listings, up 10.3% compared to the year before. There haven’t been that many new listings since August 2008. Houses are selling at a slow rate as well, giving you greater options to finding homes at a relatively low-moderate price.

Of course, if you’re just getting started in real estate, the process is going to be completely new to you, and consultation can be helpful. Companies like Washington Capital Partners can help you out with the nuances and intricacies of real estate planning. They only loan to borrowers, which allows for a more intimate, client-friendly relationship to you. They work to find you great deals and look for the most cost-effective vendors for buying houses at low prices to eventually be flipped.

You might expect working with a firm to be difficult, but it really isn’t. For Washington Capital Partners, you send in an application with the property address, preferred loan amount, and after repair value. If approved, they’ll send an expert out to inspect the property. After the inspection has been performed, they will review the final ARV and title report. The final step is simply closing the deal and then you’ve taken your first step towards making a living in real estate.

So why choose a hard money loan? With hard money loan vendors, they can get you the money faster so you can get there before your competition in a competitive real estate market. In today’s world, we’re used to the massive filling out of various forms and checks, but with hard money loans, the process tends to be much simpler. Hard money loans also offer a flexible term structure, and hard money loan vendors are willing to adapt to a changing market. Traditional financial institutions are fairly rigid and strict in their guidelines, no matter what the market looks like—their terms do not change. This greater flexibility will often lead to better results as you build your real estate portfolio. Finally, there are no prepayment penalties. If your business succeeds, one thing you do not want to have to pay for is your success. Financial institutions will often lay down hefty prepayment penalties when circumstances don’t go as planned (for better or for worse) and a loan is fully or partially paid off by the due date.

Real Estate Weekly ran an article called “The Real Truth about Hard Money Loans” in which author David Hansel cleared up any confusion about what is meant by “hard money.” He outlines the benefit of getting money upfront for construction costs to fix “distressed” homes and also give people work while doing so. The investor makes money, improves a home, and creates jobs. Hansel also highlights the benefit of the short-term repayment that comes with these loans. When they are usually paid off within one year, the interest usually doesn’t get much higher than 10%-15%.

If you live in the Washington D.C. area, given the fact that the market is remaining relatively still, but with an upward push on the horizon, it may not be a bad idea to do some research of your own and decide if real estate would be right for you.

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