Vermont is another New England state that’s not on everyone’s radar for real estate investment, but it is a state that draws a lot of tourists. Every year, about 13 million people visit the state. Vermont is a place that isn’t just a tourism hub, but has become a prime place to invest in real estate because of its reputation for safety — Vermont is the safest state in America. It is also a place that’s very affordable, but has had rapidly rising mortgages and rental prices lately.
Vermont is a state with high construction costs, low unemployment, and high price of land. Investors need to consider this complex landscape before investing in real estate in Vermont. There are plenty of great places to buy investment properties in Vermont, including Burlington, Essex, and South Burlington. It is a place known for its safety, green space, weather, and great public schools.
Most of Vermont right now is seller’s markets, which means like most of America, Vermont is mostly a housing bubble where demand outpaces supply and real estate can’t keep up with the demand of buyers and investors. Homes are selling very fast and for higher than listing price, which means real estate investors are getting into bidding wars over real estate in the state.
Investors in the Green Mountain State should consider hard money loans, particularly for investment properties. Hard money loans are primarily used for real estate transactions where the buyer buys a home in poor condition and then flip it for a profit. But hard money loans give a huge advantage in housing bubbles across America and in Vermont right now — they have very fast speeds of approval. Hard money loans can be approved in a couple of days, whereas traditional mortgage loans can take a month or more to be approved. This incredibly swift speed of approval allows buyers to put down very fast bids, and be competitive and appealing buyers.
Hard money loans are different from mortgages because they don’t depend on the credit score of the borrower. Instead, they depend on the credit score of the property. Hard money loans use the property as the asset, which means they determine the terms and rates of their loans on the after repair value of the property. Hard money loans also use the property as collateral, which means if a borrower defaults on a hard money loan, the bank doesn’t initiate a very lengthy foreclosure procedure. Instead, the lender becomes the homeowner and tries to fix and flip the property themselves, which can incur a lot of loss for the lender.
This inherent risk means hard money loans come with higher interest rates, shorter repayment periods, and lower LTV ratios than traditional mortgage loans. Hard money loans come with interest rates anywhere between 8–15%, which are significantly higher than interest rates of traditional mortgage loans. America is currently in an intense housing bubble, with 30 year mortgage rates averaging around 5.6%, but hard money loans are also more unforgiving because they come with repayment periods of around a year, which are much shorter than the repayment periods of traditional mortgage loans. These loans also come with higher down payments, as lower LTV ratios mean hard money loans don’t cover as much of the price of the home.
It’s important to only choose the best hard money lenders in Vermont, which is why we have made a list of the best hard money lenders in the state.