Unlike traditional mortgage lenders, private mortgage lenders love funding Fix & Flip investments. We make it easy for you to get a loan fast by following our lending criteria.
Are you just starting out in the Fix & Flip world of Real Estate investing? Or have you been in the business for a while and just not satisfied with your current income? Whether you’re new to the game or a seasoned pro, financing Real Estate deals can be tricky. But don’t let fear stop you from building your empire when Alternate Funding Solutions is here to help you.
We’re here to introduce you to fix and flip loans, and we’ll tell you how to get started in this article. So keep reading to learn more!
A fix & flip loan is a type of loan that finances the purchase and renovation of an investment property. These loans are usually short-term, lasting from six months to a year.
Fix & flip loans are popular among real estate investors because they allow the investor to buy a property without putting up a large sum of money for a down payment.
These loans differ from regular mortgages or other types of loans. Characteristically, fix & flip loans are:
Fix & flip loans are secured by the asset being purchased. The loan company takes a first lien position against the property. What does this mean? If the borrower should default on the loan, the lender now has the right to foreclose on the property.
Fix & flip loans usually have an interest-only period while the borrower holds onto the property. As a result, the lender doesn’t expect the loan’s principle to be paid back until after you have sold the property.
Now that you know a little more about fix & flip loans let’s move on to some tips on how to get approved.
Traditional lenders take a hard look at the borrower. They will use a business line of credit to fund a project like a fix & flip. These lenders give weight to several factors, including:
This type of loan can be harder to get and the lending process longer than needed. However, if you are a new investor or don’t have a high credit score, there are some things that you can do to increase your chances of getting approved.
If you’re a beginner, the best and fastest way to get approved for a fix & flip loan is to find a “great deal.” For example, suppose you can find and secure a deal that has a great After Repair Value (ARV) and shows a profit after renovations. In that case, it’s much easier to secure funding.
Private money lenders want to see numbers that equal a profit for the borrower. When a great deal is involved, the lender knows that there is a higher certainty that the borrower will pay off the loan.
Source properties with excellent earning potential, calculate your ARV and the Maximum Allowable Offer, and get the property under contract. From here, you will “attract” funding as lenders want to put their money to work. An attractive deal is what brings them in.
Hard money (also known as equity-based) lenders, on the other hand, look more at the asset being purchased than the borrower. These lenders are usually more willing to work with new investors and those with lower credit scores. Hard money lenders will want to know specific information such as how much the property is worth, what the repairs will cost, and when you plan to sell the property.
But there are other things that private money lenders might look at for fix & flip loans. Some of these include:
Remember that each lender is different, so it is essential to shop around. Fix & flip loans are an excellent way for beginners to start real estate investing. They allow you to buy property without putting up a substantial down payment.
If you’re interested in learning more about fix & flip loans, we can help! Our loan analysts are ready and waiting to partner with you in this exciting journey. We know that investing is both thrilling and scary at the same time. Successful real estate entrepreneurs realize they need the following to be successful:
Give Alternate Funding Solutions a call at 1(800) 366-WIN-1 or 1(800) 366-9461 with your questions, or start our easy loan application process today. Your success is waiting!
Private Money Lenders love funding Fix & Hold to Rent deals. We can also show you how to build up your empire.
