Fixing and flipping houses is only one way to make money investing in real estate. A lot of people dream of getting into this business, but funding is the number one obstacle. It costs a lot of money to fix and flip houses. You need capital to purchase homes, cover the cost of renovations, contractor fees, listing and broker fees, holding costs until you flip the home for a profit.
A fix and flip loan is a great way to get financing if you’re just starting out in the housing industry. If it’s your first time, you may not have the seed money that you will need to get started. Fix and flip loans can boost you to get into this industry.
Here are some things to know before getting a fix and flip loan:
The Best Financing Option:
Obtain financing is one of the basics of fixing and flipping homes. Keep in mind that the turnaround in most of these cases is less than a year. That makes getting a flip and fix loan from a traditional bank almost impossible. Banks make their money from the interest accrued from long-term financing agreements. They don’t like having the borrowed amount paid off within a year. So if you need to get this type of quick funding, you’ll have to look for a hard money lender who will agree to a short-term deal.
Find The Right Property:
Finding the right property is the first step of flipping houses business. You must know what a house will sell for once you fix it up and how much repairs and upgrades will cost. You’ll want to find something that you can get a really good deal on, and it should also be in need of renovation. Keep an eye out for foreclosures or those homes that have been damaged by fire or water. Once you’ve found the right place, one that you think you can make a profit on, it’s time to secure a fix and flip loan.
Keep Your Documents In Order:
Make sure you have paperwork in order before meeting with someone to secure financing. Don’t forget to check your credit score to make sure that the lender won’t think that you are a risky borrower. Make sure you have all of your documents in order to show how much reserve capital you have. You should also be able to verify your income by having pay stubs, a W-2, and tax returns on hand.
Understand Financial Calculations:
Financial calculations are different in fix and flip loans as it’s not a traditional mortgage. Lenders will calculate the amount they’re willing to front you by looking at your money reserves, your credit, your expertise, and the purchase price of the unit you’re going to rehabilitate. They also take into consideration the estimated costs of renovating and repairing the property and the estimated value of the finished project.
Know The Loan Term:
You are recommended to keep in mind that the term for fix and flip loan is usually between 6 to 18 months. While some companies will sometimes allow for three-month extensions. Creating a budget and a schedule can make rehabbing easier, so you should have a realistic plan in place for completing the rehabilitation and selling the property before your time is up. If you don’t give yourself enough time, you could be in trouble.
The Bottom Line:
Fixing and flipping houses is definitely a great way to earn money. To succeed in this business, however, you have to be patient and dedicated to your job. If you want to get into the home flipping business but don’t have the cash on hand, a fix and flip loan may be what you need. However, your chances of securing the financing will be improved if you follow the tips above.
Manga Capital Group, Inc is a leading residential and commercial lending company in California with 30+ years of experience in the real estate industry. We provide unmatched expertise in customizing a fix and flip loan structure to meet your requirements with minimal documentation. If you are considering for a fix and flip loan, call us today at (310) 734 4044 or email info@magnaloans.com or visit www.magnaloans.com
