Top Three Financing Options For Fix and Flip Investors
Category : Fix & Flip Loans , Hard Money Loans , Home Equity Loan , private money lenders
Flipping a house is a form of real estate investment that involves purchasing a house or property, fixing it up and selling it quickly. To get started, you will need capital to purchase and renovate a house before you can flip the house for a profit. Here are the costs involved in flipping a house:
- The purchase cost of the house.
- Rehab costs.
- Appraisals and inspections carried out on the property.
- Holding costs, Realtor fees, and closing costs.
- Loan interest and fees.
- Down payments on loans.
Now you will have to look at how to cover these costs. Luckily, there are four fix and flip financing options available to flippers:
1. Traditional Bank Financing:
The first place you might look for a loan is your local bank. This is where the bank pays for the property and you pay the mortgage payments until the house is rehabbed and sold. You will need good credit and good track record of successfully flipping houses to qualify for a traditional loan. If you have bad credit or low credit score, there is no chance to get a traditional fix and flip loans for you. In this situation, you can consider the second financing option that is hard money loans.
2. Private Hard Money Loans:
A hard money loan is a specific type of asset-based loan financing through which a borrower receives funds secured by real estate property. Hard money lenders make loans for flippers and real estate developers on slightly different terms than banks. They provide hard money loans which are best for experienced or inexperienced flippers who need money quickly. These loans are designed for people who don’t necessarily have great credit but need money to complete their renovations.
3. Home Equity Loan or Line of Credit:
A home equity loan is basically a second mortgage and you are repaying the loan over a fixed term. A home equity line of credit usually comes with a variable rate, but you can draw against your credit line whenever you need extra money. So, if you have significant equity in an existing investment property or primary residence, you may consider tapping that to fund your house flipping project. The biggest issue with this financing option is that your house serves as the collateral and if you fall behind on the home equity loan or line of credit payments, the bank could decide to foreclose on your house.
The Bottom Line:
House flipping is not only for the rich but also for the resourceful! The key is finding the right solution for your unique needs. These are top three ways you can finance house flipping projects. Out of these three fix and flip funding options, the best one for you depends on the type and condition of the property, your experience with real estate investment, and your personal financial situation.
If you are a fix and flip investor with imperfect credit who is looking to buy discounted properties, fix them up, and sell/flip them within 12 months, then consider hard money loans for the capital you need. Magna Capital Group, Inc. is a reputable hard money lender in California. We offer financing options to real estate investors looking to renovate and resell residential and commercial properties. We provide the best loan programs to meet your financial goals. If you feel that a hard money loan is right for you or if you have any query, feel free to call us now at (310) 734 4044 or email at info@magnaloans.com.