Fix-and-Flip Loans Nationwide

What are Fix and Flip Loans and why you should use them.

What has been holding you back from becoming the next HGTV house flipping sensation? You are not alone if you said “capital.” Fix and flip loans might be just what you are looking for. Would-be real estate investors are frequently thwarted by a lack of capital.

In the last ten years or so, house flipping has grown increasingly fashionable. House flipping, on the other hand, may help you diversify your investment portfolio and earn a substantial income in a brief period.

Most individuals are unaware that there are specific financing programs available to assist them. A fix and flip loan are one of the simplest methods to borrow money to start your house flipping operation.

What Is a Fix and Flip Loan and How Does It Work?

A fix and flip loan are a short-term, Interest only loan that investors can use to pay the costs of acquisition, repairing and renovating a property.

These short-term loans are distinct from traditional mortgage loans in that they are intended to assist the investor in covering the initial expenditures of purchasing and upgrading a property. Once the property sells or refinanced, the loan is paid in full.

Fix and Flip loans are asset-based, requires no income verification, and usually closes in weeks not months! These are some of the reasons, Real Estate Investors choose Hard Money over Traditional Bank loans.

Fix and Flip loans are short-term. These loans last anywhere from six months to one year. Most flippers who take out these hard money loans plan to repay the debt with the proceeds from the sale of the home. If the Flipper can upgrade the property, it will sell quickly, and they can pay off the debt faster.

What are the Benefits of a Fix and Flip Loan?

A fix and the flip loan can help you receive the finances you need to buy your real estate plus the extra money you will need to invest in repairs and improvements if you are new to real estate investment, or even if you are not.

If you do not have enough cash on hand to complete the renovation, a fix and flip loan is a wonderful option.

Many of these fix-and-flip loans have a high loan-to-value (up to 90% purchase price) up to 75% of the after-repair value and 100% of the rehab budget rolled in.

However, these terms range from one lender to the next. Some hard money lenders will lend up to 80% of the purchase price and 90% of the rehab budget.

This provides you, the investor, with the finances to not only purchase the property but also renovate it. This is the next best thing if you do not have the cash up front. Fix and flip loans are much easier to qualify for than traditional types of loans. The borrower’s debt ratio and credit are not as important to the Private Money Lender who provides these investment loans. Even if your credit is less than perfect, you might be able to get a hard money loan. Typically, the lender will hire an appraiser to assess the property and determine whether it is worth what the borrower is seeking. The lender will be able to approve a loan in a significantly shorter amount of time after the property has been appraised, usually within a few business days.

The creditworthiness of the borrower is not as important to the Private Money lenders as the collateral. They know that if the property sells, the borrowers will be able to repay the whole amount.

Hard money lenders protect their money by making sure the borrower has skin in the game. If the borrower defaults on their payments, the Lender would take ownership of the property and sell it for a profit.

Even after paying off the debt, you should make a fair profit when you sell your flipped house.

What You Should Know

You will also need to think about having at least 4-6 months reserves. Carrying expenses (mortgage payments), which include sustaining utilities, HOA fees, property taxes, insurance, maintenance fees, and so on — the fees that will be required to retain the property while you try to sell it – are often overlooked by flippers.

As a result, you will want to make sure you get at least two bids from your contractors before applying for a construction loan. You can even think about padding your estimate by adding 10 to 15% to the original figures.

New possibilities

Because the real estate market is influenced by so many factors, it is uncertain how the ongoing health crisis will affect it. The real estate market has been consistently rising thus far.

However, other experts predict that the pandemic’s coming foreclosures would usher in a new period of opportunity for individuals looking to build or start their real estate investment portfolio.

If history has taught us anything, it is that uncertainty often implies possibilities for those who are willing to take advantage of them.