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Fix and Flip Loans: Learn If This Financing Is Right for You

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New York property investors can make a lot of money by renovating homes then selling them at the new value. However, this process takes capital. Fortunately, fix and flip loans are specifically designed for this purpose.

What Are Fix and Flip Loans?

A fix and flip loan is a specific type of hard money financing, which is lending provided outside of traditional financial institutions such as banks and credit unions. Since these third-party lenders don’t have to adhere to the same regulations as banks, they can offer a wider variety of loans with greater leeway.

How do you know if private money lending in New York is right for you? This financing works best for property investors who intend to quickly sell a property after renovation. Of course, there are other lending options, so it’s essential to consider fix and flip loans pros and cons before applying.

What Are the Pros of Fix and Flip Loans?

The pros of fix and flip loans vastly outweigh the cons for many people. In fact, hard money financing is sometimes the only option for property investment.

Provides Alternatives to Traditional Loans

Property investors often have a lot of irons in the fire, which means simultaneous loans to fund their projects. Unfortunately, this debt may disqualify them for good interest rates or loan approval, even though these individuals are turning a profit.

The approval criteria are less stringently regulated for third-party lenders, which means they can provide funding where banks can’t. They may even offer financing programs for applicants with poor credit histories or past loan rejections.

Offers Flexibility

If you plan to fix and flip a house, you need to cover several expenses:

  • Real estate purchasing
  • Labor
  • Materials
  • Permits
  • Taxes
  • Insurance

A fix and flip loan lets you spend the funds on all of the above and more. For example, if you encounter unexpected repairs, you can use this financing to care for them.

Considers Property Value

Traditional bank loans require mountains of paperwork detailing your financial dealings. However, a fix and flip loan can be approved based on the value of the purchased property. Most third-party lenders use a loan-to-value ratio to determine the loan amount.

For example, a lender may offer 75% LTV of a home’s value. Focusing on property value is a boon to debt or poor credit history investors. If the real estate value covers the principal and other requirements, they may get approved despite a lacking record.

Provides Quick Approval

Since there’s less paperwork, fix and flip loans get approved at an expedited rate. Mortgages can take as long as 45 days to process because banks need to verify every provided document. In contrast, you can get funding from a fix and flip loan within two weeks. This short time frame is essential if you’re trying to negotiate with a seller or snatch up prime real estate.

Offers Shorter Terms

Yes, short terms can be a benefit as well as a drawback. Most fix and flip loan terms don’t exceed two years, compared to the 30 years most mortgages last. Since property investors aim to sell their renovated real estate, they don’t have to worry about paying off such a large amount within such a short time. In fact, a short term is beneficial in this industry since it means borrowers won’t have as much debt in their name when they apply for future financing.

What Are the Cons of Fix and Flip Loans?

Every type of lending has drawbacks. As a borrower, you need to consider whether they outweigh the benefits. Many options for private money lending in New York have similar caveats.
Hands shaking a deal

Higher Interest

Compared to traditional bank loans, fix and flip loans have higher interest. Lenders charge higher rates because they’re taking on more risk, so they need to ensure the transaction is worth it.

However, higher interest may not pose too much of an issue with fix and flip loans because the loan terms are very short. Most property investors plan to sell real estate as fast as possible and pay back the loan before too much interest accrues.

Large Down Payment

To counter the higher risk, lenders may also require you to place a large down payment on the property. If you don’t have the funds handy, this requirement may stretch your resources.

Shorter Terms

Fix and flip loans are short-term financing, which means you could be expected to pay back the principal (with interest) in as little as a year. If the housing market isn’t in your favor, this could put you in a tight spot.

Are you looking for private money lending in New York? Gauntlet Funding can help you find the perfect loan. For more information, visit us online or call (631) 465-2161.


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