Interested in Fix and Flip Loans? You're not alone. The real estate investing industry is a profitable industry that many people are interested in. One of the main struggles with people entering the industry is financing, and how to go about properly obtaining funding for a fix and flip purchase.
Read on to find out more.
As defined by Fitsmallbusiness.com:
"Fix and flip loans are used by short-term real estate investors to purchase and renovate a property before flipping it for a profit. The main goal with flipping homes is to purchase, renovate, and sell quickly and efficiently."
Within the fix and flip loan category, there are several types of loans you can choose from that achieve similar goals. The first is hard money lending, which is simply using secured collateral, typically real estate, to back the loan. One of the benefits to using a hard money lender is that they will typically work better with a fix and flip project. Also, hard money lenders are more likely to help finance a run down house than a traditional lender. They are interested in seeing the upside potential of property, as are the individuals performing the fix and flip.
Another sub category within the fix and flip loan world are bridge loans. Bridge loans are typically short-term notes that allow you to purchase another property while attempting to sell another. This bridges the time between buying and selling, allowing you to secure more permanent financing later down the road. However, you want to ensure you have more secure financing close behind, otherwise you may find yourself in a bind.
Another lending type in the fix and flip loan category is a line of credit on your investment properties or a future properties.
Here's how it works in the hard money loan space: you would obtain a line of credit against the equity in your investment properties paying off any existing loans, and use that to fix and flip other homes. Or even better you can be preapproved for a line of credit on future investment properties. All of the preliminary due diligence by the lender on your in done up front and one you find the opportunity it greatly increases the speed to close.
While this can be an attractive way to enter the real estate flipping game, this may not be a fit for everyone.
Keep in mind that this can be risky and requires a solid understanding of the marketplace.
While these fix and flip loans carry a higher interest rate then a traditional home loan its due to the added risk to the lender. You need to know your numbers in the fix and flip space to make sure there is profit in the investment property. Also, in order to generate a profit you have to sell the home you’ve just renovated. Make sure you do all your research before jumping in and talk to a fix-and-flip loans expert who can help.
Fix and flip loans are a wonderful way to gain the financing you need to flip a property without committing to a traditional 15- or 30-year mortgage. Want to learn more? Simply contact Gauntlet Funding for your lending needs. We'll walk you through the process and help you find fix and flip loans to fit your situation. Call our friendly experts today at 631-465-2161! We're happy to answer any of your questions.
What are Fix and Flip Loans? | Gauntlet Funding - NY