How To Get Fix and Flip Financing
House flipping can be a personally and financially rewarding experience. While it isn’t for everyone, it is something that you can potentially make a good amount of money doing, especially if you are able to do some of the work yourself. However, it is also expensive. You need to pay for the property, supplies and labor. Getting fix and flip financing can help you take advantage of this opportunity.
In some cases, you may be able to get a conventional mortgage to cover the cost of the property. Depending on your lender, you may or may not be able to include additional money for the renovations. Additionally, conventional mortgages generally aren’t available for properties in poor shape. There are guidelines that lenders follow about what properties can be financed.
Hard Money Loan
A hard money loan is a type of loan that is secured against hard assets, in this case, the property. You will be able to borrow a certain percentage of the after-renovation value of the house. This will give you some money for renovations.
Borrowing a hard money loan is often significantly speedier and less complicated than a more conventional mortgage. However, they also tend to be more expensive. Depending on the lender, you may be able to pay interest only or even let the interest accrue while you fix the home.
Private lenders can be a great way to get financing for your flip. Of course, they are also harder to find and less regulated than banks. So, you may struggle to find someone to work with.
A private lender is likely to offer more favorable terms than a hard money loan. However, they may also want to vet the project more carefully.
Some lenders will take advantage of inexperienced flippers to drive unfair deals. So, it is helpful to do your research before approaching anyone. One helpful strategy, at least initially, is to go through a middleman. Many banks and alternative lenders work with high net worth individuals and capital sources and may be able to create a tailored deal for you.
There are several forms of fix and flip financing. Getting the right terms can be the difference between a successful flip and a financial loss. So, do your homework and only work with sources you are confident you can trust. Once you get some experience, however, this can be a lucrative way to make money.