The real estate market in Houston is a jungle, and because of that, hard money lending is the best way to not just keep up – but instead strategize and optimize each investment. For decades, many real estate investors in Texas have been told to believe that cash offers are the best way to secure the best properties in development hubs such as the Heights or Sugar Land. However, the truth of the matter is that for many local investors, this rule can be more of a gatekeeper than a successful strategy. Relying solely on cash offers limits your ability to compete, which is frustrating for projects with exciting possibilities. Instead of relying on the old, worn-out “cash is king” mindset, turn to hard money lending from Texas Funding in order to match both the speed and reliability of cash offers while maintaining liquidity for managing multiple deals at once.
The Role of Hard Money Lending in Houston Bidding Wars
Although it might seem like real estate deals always go to the highest bidder, in high-traffic counties like Harris County, the truth is not always so obvious. Many sellers are highly motivated for a variety of reasons, including:
- Financial urgency and relief: Things such as property tax delinquency, avoiding pre-foreclosures, and medical bill liquidation from unexpected healthcare costs.
- Major life transitions include divorce settlements, downsizing for senior living, death, inherited property, or debt consolidation, all of which can contribute to this.
- Property-specific motivations: Sometimes, the property might be un-lendable from a typical bank’s perspective due to foundational issues or outdated wiring. Or, another common scenario is flood fatigue after a major storm and overtired landlords from late-paying tenants or constant maintenance.
Regardless of the unique scenario, many Houston sellers are highly motivated by one central theme: timing. Until the cash actually hits the seller’s account, the price tag is simply a figure, which is why a fast turnaround cash offer is typically seen as the gold standard. Because of this, it isn’t so much about the final amount as it is about peace of mind and complete compensation.
Hard money lending in Houston offers a unique middle ground where both buyer and sellers can achieve their goals. It isn’t about just bringing another loan to the deal; it’s the technical equivalent of a cash deal, without putting all of your capital into one project at a time and limiting your success. This is because hard money lending combines speed, minimal contingencies, and guaranteed exit strategies with more impressive offers to create a sure bet in a massive sea of possible buyers.
How Using Capital Works For Hard Money Lending in Houston
It may sound counterintuitive to enter a hard money loan agreement when you have cash sitting in the bank, mostly due to many new investors seeing their own money as “free” capital. But the truth is, in a fast-paced market like Houston’s, this type of thinking is the fastest way to severely limit your success and productivity. By sinking $250,000 into one real estate flip-turn project at a time, you’re not only limiting the number of projects you work on at a time, but you also eliminate the ability to pivot. Because of this, utilizing hard money lending can shift the weight and mystery onto the plate of our team at Texas Funding. This allows you to stay quick on your feet in case a new, exciting project arrives on the scene before you can enter into another cash offer.
The biggest reason to choose a hard money loan instead of a cash offer is the flexibility it gives you. When your entire career is geared toward flipping property and entering exciting new ventures, being able to pivot quickly is paramount. Because of this, the single most frustrating thing as a real estate broker is entering a cash offer when a new, highly attractive property deal enters the market – forcing you to watch from the sidelines while you wait to complete your current project. At Texas Funding, we offer flexible funding plans in order to allow our lenders to enter multiple projects at once and keep their finances in complete control.
Additionally, hard money lending in Houston is the best way to mitigate financial risk. This is because spreading your capital across multiple properties through hard money loans, instead of just one project, both diversifies your portfolio and keeps a single market dip from damaging your finances.
Using Hard Money Loans as “Synthetic Cash”
To a Houston seller, a “cash offer” includes much more information than just where the cash originated; the key selling point is the speed and reliability of their exit. Because of this, using hard money lending is essentially using “synthetic cash” to bypass the slow-moving, traditional bank lending process while still maintaining the flexibility of a cash-offer investor. Unlike traditional banking loans, hard money lending in Houston through Texas Funding can be closed in 5-10 days, all tailored toward your unique financial needs and based on the project’s timeline, structure, and goals.
What truly makes this option unique and much more attractive than a cash offer is that it functions exactly like a bank statement if a bidding war ensues. If you’re looking for a competitive edge while still protecting your own financial situation, then hard money lending is the ideal and most strategic solution.
Finally, by using hard money as synthetic cash, you are able to embark on project deals that traditional banks won’t even touch. This is especially essential in Houston, where over 65 thousand new properties are being developed within flood plans, areas where typically banks won’t touch. By using hard money lending, these properties can be fully and efficiently developed into strong, sturdy, and reliable ventures that would’ve gone amiss without Texas Funding.
Rethinking Hard Money Lending and Interest Rates
The first step to mastering hard money lending is shifting your perspective: don’t look at interest as a cost of debt, but as the price of leveraging your portfolio for greater returns. What makes it a benefit of hard money lending is that it takes an unreliable cash flow deal and instead turns it into a predictable, monthly line item. This can play a key role in helping your real estate company strategize your monthly budget and plan ahead for the future with optimal predictability.
Partnering with the Right Hard Money Lender in Houston
In order to fully maximize your real estate project’s success, choosing the right hard money lender in Houston is imperative. At Texas Funding, we operate as a relationship-based lender, focusing on your goals, big-picture details, and portfolio to find the right loans for you, instead of things that typical bank lending looks at, such as credit score or bank account balance. If you are looking to enter a profitable real estate project in Houston, hard money lending is the best way to secure your liquidity while still maintaining flexibility, giving you the ability to achieve top success and financial freedom. Contact Texas Funding today for a free hard money loan estimate for your upcoming project.