Fix and Flip Loans for Rehab Properties
For the experienced, savvy investor, house flipping can be a lucrative business. Real estate professionals who have skill in this practice successfully take inexpensive, often rundown properties, make wholescale renovations and turn in handsome profits. Longtime house flippers are generally established enough in their businesses that they pay for these homes in cash. However, getting started in the business usually requires some financial backing. This is where fix and flip loans can help. If you seek this financing, there are a few options at your disposal. Knowing about each will help you decide which is right for you.
Finding mortgage lenders online is becoming an increasingly more popular way to obtain financing for flipping houses. If you decide to go with these loan, you can be approved within five days, and your money can be in your account in as little as 15. Rates are a little higher, usually between 7 and 12 percent, but lower credit scores of 650 are allowed. Repayment terms are short, usually as low as one year. Be advised that your debt-to-income ratio must be less than 50 percent. Not all states offer online lenders as a form of fix and flip loans, so check and see where your state falls.
Hard Money and Private Lenders
If you want to get into the flipping business but your credit score is a little on the low end, hard money loans or private lenders might be your best choice. A credit score as low as 620 can qualify you for one of these loans. Of course, interest rates are between 8 percent and 16 percent, but you can finance up to 65 percent of the home’s value after the repair. Hard money lenders and private lenders are accustomed to helping finance house flippers, so this might be a viable choice for you.
Traditional bank lending is still a popular choice for house flippers. Though the requirements for qualification are stiffer, you’ll get a better rate—usually less than 6 percent. The approval process is a bit longer, but you can also finance up to 65 percent of the property value after the repairs have been completed. Another advantage of bank lending is that you will have plenty of lenders to choose from.
Obtaining fix and flip loans doesn’t have to be difficult. Sometimes this form of lending is necessary to get you on track to starting a successful business. Evaluate which of these forms of lending makes the most sense for you.