Fixing and flipping houses presents a generous second, and sometimes primary, income stream to someone with the knowledge and funding to do it. Home and garden shows make this type of work appealing to people who enjoy decorating homes. If you were to get into the fix and flip business, do you know how you would secure financing?
Many people think there is a difference between fix and flip loans and rehab loans. The truth is they are one and the same loan, but different lenders choose different marketing terms.
The word rehab might be used to refer to an older home that is in need of updating, but any home that is in need of repairs needs to be rehabilitated so that it can be flipped.
Securing a Loan
Before searching for financing you need to determine how much you need to borrow. The idea behind a fix and flip property is that you are getting the property well below its market value. This is how someone who fixes and flips homes makes money. Many investors don’t want to touch fix and flip properties due to the magnitude of work involved.
First-time investors may have a harder time securing financing. Any bank that is considering working with you will want to know how much experience you have and may also wish to see samples of your work. This is why many first-time investors will have to find other means of financing.
If you can’t secure a loan through a traditional lender, you still have options.
- You can opt to do a cash-out refinance on your own home in order to secure your initial funding on your first property. When you sell the fix and flip property, you should be able to pay back what you borrowed against your home and still have the funds to fix and flip another property.
- You can also seek out private investors. This could be family, friends, or associates who are also interested in getting into the fix and flip business.
- You can also secure financing through a hard money lender. The drawback will be the terms of the financing. A hard money lender will want to charge an interest rate that is lucrative for them.
Anyone wishing to get in the fix and flip business can easily do so with a little determination. In addition to finding financing, plan to find a contractor you can trust to work with you on each property.