Investing in a property in order to renovate and sell it for a profit is as rewarding and exciting as it is challenging. Many people choose the popular route of taking out a fix and flip loan from an established lender, and if you’re considering such a route yourself, then you’ve clicked on the right article.
A Fix & Flip Loan in a Nutshell
Fix and flip loans are tailor-made for investors in real estate to utilize to both initially purchase a new property that isn’t usually intended for them to live in themselves, and then renovate it.
Fix and flip loans are essentially small business loans and therefore are often used to cover any additional outgoings related to selling and initially listing the property once the renovations are complete.
The Inner Workings of a Fix & Flip Loan
You’ll find that loans for fix & flip are readily available but do make sure that you do as much research as possible into any potential and wholly viable lenders, and additionally, that you check out recent and older reviews online.
The structure of a fix and flip loan can vary, both due to the needs of the real estate investor and also the lender themselves, but they’re nearly always secured by the building being renovated itself. Regardless of the structure of the particular style of fix and flip loan, there’s nearly always a zero percent additional fee if you want to pay the whole balance of the loan off early.
Different Types of Fix & Flip Loans
As with other forms of loans, under the umbrella term of fix and flip, there are, of course, different types, which are as follows:
- Hard Money Loans: Where the borrower is unable to secure another type of loan or else is looking for a speedier option.
- Personal Loans: Where people intending on flipping a property have a good credit score and therefore need less money in their lump sum.
- Business Line of Credit: This is reserved for experienced real estate investors who want a more flexible financing option.
- 401k Loans: For those who are either already retired, or else are nearing retirement.
- Seller Financing: Where the buyer has found a seller who has agreed to work as a team.
- Home Equity Loans: For those homeowners who own more than 15% of their home’s equity.
Always Compare Lenders
The right fix and flip loan and indeed, the most suitable lender, will depend entirely on your individual financing needs, as well as the finer details of your building project and your own competency at practical renovations.
During this research process, make sure that you find out everything you can about the history of a potential lender, as well as reading reviews both online and in their own paperwork from recent happy clients. Finally, it will greatly benefit both you and the project that you’re about to undertake if you can find a lender who has proven and extensive experience in fixing and flipping properties.