9 Tips For Scoring Fix and Flip Loans
Need to find a couple of fix and flip loans? Click here for nine tips to help you find the best fix and flip loans for your needs!
What if flipping a house was as easy as flipping a coin?
For many flippers, the hardest part of the job is getting the necessary funds. And without these funds, fixing and flipping would be impossible.
However, it’s possible to score fix and flip loans very easily. Keep reading to discover our hottest tips!
1. Hard Money Loan
The best forms of fix and flip financing are designed around your very specific needs. And that’s why we like hard money loans so much.
These rehab loans were designed with a very specific purpose in mind: to help you fix up a home. And flippers who have low credit may have an easier time obtaining such a loan.
Why? Simple: the bank pays more attention to the potential value of the flipped house than they do to your credit or financial history. Throw in the fact that you can be approved in as little as 15 days and it’s easy to see why these loans are so popular among flippers.
2. Permanent Bank Loan
One of the reasons you need fix and flip loans is that traditional loans aren’t designed for this purpose. A standard mortgage, for example, is not designed with quick approval or speedy repayment in mind.
However, certain kinds of permanent bank loans can help out certain kinds of flippers. With an FHA 203(k) loan, you can renovate your primary residence and eventually try to sell it. And Fannie Mae’s Homestyle Loan can do the same thing while also funding the purchase of single-unit properties for investment purposes.
Therefore, while permanent bank loans are not our first choice, they may come in handy for your specific needs.
3. Cash-Out Refinance
Many of the funding methods on here work well for first-time flippers. Once you are more established in this line of business, though, cash-out refinancing will become your best friend.
The idea behind this is simple: you refinance an existing home in order to buy a new home. The only real limitation is the status of the existing mortgage.
Basically, you must pay off your existing mortgage before refinancing. That means that whatever difference there is between the old loan and the new one is the amount of “cash-out” money you may use to invest.
Obviously, this form of financing works better once you own multiple properties. It serves as a natural and easy way to use a home’s existing equity to fund a new “fix and flip” venture.
4. Investment Property Line of Credit
A line of credit can be a perfect way to invest in a new property. Fortunately, there is a kind of line of credit designed for this very reason!
Investment property lines of credit are similar in function and design to home equity lines of credit. However, as the name implies, they are designed specifically to help you purchase investment properties.
Such lines of credit are useful for buying a single investment property or even starting an investment portfolio of properties. The latter option is particularly good for experienced flippers who need quick access to large amounts of credit for potential investments.
5. Home Equity Line of Credit
If you are just starting your flipping career, you may not want an investment property line of credit. Instead, a home equity line of credit (also known as a HELOC) may be the better option.
Such a line of credit is based on the equity that your existing home already has. You can borrow up to that equity amount in order to buy new homes or make necessary repairs.
It is possible to take out a HELOC without paying off the existing mortgage. However, you are limited to getting a HELOC only on your primary residence.
If your home has a large amount of equity already, this can be a great way to break into the flipping business.
6. Bridge Loans
The flipping business means that you are often in-between transactions. And it can be difficult at times to get the money you need during such a period.
That’s where a bridge loan comes in. These loans are designed are only temporary, and they are perfect when you need money to buy one property now and sell another property later.
Such loans offer flexibility because you can buy new properties without having a contingency in place. However, bridge loans cannot be used to finance any renovations, meaning you may need another source of income to rehab a home.
7. Solo 401(k)
We don’t often think of a 401(k) plan as a way to invest in real estate. However, with a solo 401(k), you can do just that!
Small business owners without full-time employees can use this 401(k) to make real estate investments. It is also available to those who are self-employed.
In short, this lets you invest in real estate while enjoying many of the tax advantages of a traditional 401(k).
Crowdfunding is becoming an increasingly popular way of funding many kinds of projects. And now, crowdfunding is a way to fund your next real estate project.
By investing in either the debt or equity of a project, investors receive a particular stake in this project. This opens up several potential doors for your own business.
You can use crowdfunding to receive the money you need for your own project. Alternately, you can invest in someone else’s work without having to fully devote yourself to a renovation project.
9. Business Credit Card
Our last fix and flap funding method is very simple: getting a business credit card. However, this is mostly useful over short periods of time.
As with other credit cards, your credit score determines how much you can borrow. And if you don’t pay everything back within 30 days, you’ll be hit with the interest rate.
While you don’t want to pay extra on interest, such cards are a perfect way to buy tools and supplies for flipping.
Fix and Flip Loans: Opportunity Awaits
Now you know more about fix and flip loans. However, do you know who you can rely on when you need financing?
We offer multiple forms of financing for house flippers of every experience level. To see how we can fund your next project, apply for a loan today!