The Right Financing for Fix and Flip Properties
There are few real estate adventures as rewarding as a fix and flip. Whether you’ve flipped many properties or just getting started in the industry, learn how you can make this business venture profitable with competitive financing today.
There are a few basic financing options available for flipping properties. First, some first-time flippers consider using a traditional mortgage to purchase a property. While this may work in some specific situations, you may not be approved for a mortgage on a second home or an investment property. A mortgage may also take too long to receive. Lengthy loan applications can mean that the best properties are gone before you can receive approval.
Instead, look for private lending for a more flexible alternative. Financing your fix and flip project through a private lending institution allows you far more flexibility. You not only can receive financing faster, but you’ll also typically receive it in the form of cash. A cash loan offers you the flexibility you need to quickly purchase property and pay for any renovations that are necessary to sell it for a profit.
Private financing may come with higher interest rates, however, so be sure you have a strict timeline for your fix and flip. Buying and then selling your property quickly enables you to receive maximum profit with a minimal interest payment.
In order to receive private financing, you’ll typically need to provide collateral. Often, this is the property itself. Some private financial institutions require short-term mortgages, so you’ll need to take steps to ensure your property can be sold before your loan term expires. Private loans that don’t require collateral typically come with even higher interest rates.
Finally, if you already own a home or have multiple properties in your investment portfolio, consider using a home equity line of credit. This uses another property as collateral in order to receive the additional financing you need to make repairs or renovate your new property. This carries additional risk, as you may lose your home or first property in the event that you are unable to pay back the line of credit.
A fix and flip property can be an exciting opportunity. With careful planning, quick thinking, and the right financing, you can enjoy a healthy career as a flipper. Once you have access to fast and flexible financing you can carefully research the best properties on the market and build a trusted team of renovation experts to help you quickly make a profit.
