Fix and flip loans are a type of residential real estate loan that investors use to buy and renovate discounted houses then turn around and sell them at a profit. Not every real estate investor takes out fix and flipper loans, but many do. Some of the most notable, successful investors in history have used fix and flip loans to get started.
Who Can Get a Fix and Flip Loan?
Fix and Flip Loans are generally for borrowers who have a lot of experience in buying, rehabbing, and selling properties. If you’re new to real estate, you can work with an experienced partner who has completed one or more projects before.
Fix and Flip Loans are also intended for investors who already have the cash to purchase a property but need additional financing to complete the rehab. If you don’t have enough money on hand to complete the project, consider obtaining a line of credit that will allow you to finish the project.
Who Offers a Fix and Flip Loan?
If you’re interested in becoming a fix and flip investor, here are four lenders who provide loans for fix and flip properties:
Hard Money Lenders
Hard money lenders are investors or companies that lend money to borrowers at high-interest rates. They don’t usually do a credit check, so they’re an ideal option for aspiring fix and flippers with bad credit.
Banks offer traditional loans at competitive rates if you have excellent credit, but they take longer to process than hard money lenders. You may also be required to put up collateral or pay private mortgage insurance (PMI) if your down payment is less than 20%.
Online lenders can offer some great deals on fix and flip loans, but they often require more information than traditional lenders do. If you have bad credit, these online lenders may require credit checks before they approve your loan application.
Credit unions can prove to be a good choice for borrowers, typically offering lower rates and fees than banks. However, credit unions are just as likely to have strict qualifying requirements you’ll have to meet in order to get approved for a loan.
How Do Fix and Flip Loans Work?
Fix and flip loans provide financing so you can purchase and renovate properties quickly. These loans are short-term and are similar to hard money loans. Many investors use these loans for their first few flips until they have enough cash on hand to finance investments themselves.
There are many reasons to use a fix and flip loan. If you want to quickly make money by buying a property, doing some renovations, and selling it at a profit, this is one of the quickest ways to do it. You can also purchase properties that need extensive repairs in order to resell them to other buyers. This makes them a lot easier to sell and can still allow for good profits when done correctly. However, there are many things to consider before using a fix and flip loan.