Fix and Flip Loans for Beginners
If you’ve been dreaming about buying, fixing and flipping property for profit but think it’s out of reach, we’re here to tell you that it’s not. Flipping houses with hard money is a great way for a beginner to get in the game. Of course, like any major financial venture, doing your research is critical. Here are six key basics anyone looking for a first-time fix and flip loan should know.
- Be prepared to secure unconventional finance. Due to the risky nature of flipping property, securing a loan with a traditional lender is hard enough for veteran flippers, let alone for beginners. As such, as a first-time flipper, you’ll need to look outside the square for alternative options. The good news is, there are plenty of fix and flip financing options even for beginner flippers with bad credit.
- Be prepared to do your research and shop around for a fix and flip loan. Because fix and flip lenders aren’t bound by the same regulations as traditional lenders such as banks, their offering varies greatly. Don’t be afraid to look around or to negotiate – you don’t need to settle for the first loan you’re offered. Beyond the obvious things such as the term of the loan and its fees, other things to consider when choosing your fix and flip funding include:
• How much of the cost the fix and flip lender will cover
• Whether the fix and flip loan will cover the purchase price as well as the costs of the renovation and any other associated costs
• How fast the lender can provide the money. Generally, with a fix and flip property, you want financing that’s going to happen as quickly as possible so you can seal the deal and start working without delay
• Whether or not there are hidden fees or terms that are going to catch you by surprise down the line. Always read the fine print!
• Whether you’re going to meet the fix and flip mortgage criteria of the hard money lender you’re approaching. For instance, if your credit history is less than favorable, you’ll need to seek a lender that offers bad credit fix and flip loans
- Be prepared for higher fees. Fix and flip loans attract higher fees. Fortunately, since the idea is that your fix n flip project is only a short-term venture, you won’t be paying these fees for long. Accordingly, expect a shorter term for your fix and flip hard money loan and be prepared to have finished the work and made the sale within that time frame. The good news is, once you get more flips under your belt and have an impressive track record to show fix and flip hard money lenders, these fees will start coming down.
- Be prepared to work and sell fast. As we’ve mentioned above, a fix and flip loan incurs fees that are much higher than a traditional loan, which means you want to finish and sell your project as quickly as possible to maximize your profit. The less time you need to be paying those interest rates as well as associated costs of owning property such as utility bills and insurance, the better.
- Be prepared to work hard. They make it look so easy on TV but flipping property for profit is certainly no walk in the park. You’ll have many hurdles to overcome starting with finding the perfect property and then the perfect loan, and the decisions will keep piling up from there. A property in terrible condition will come with an incredibly appealing price tag, but will be a lot more work. Consider whether your time, energy and budget allow for a major structural renovation or if you’d be better off attempting something more simply cosmetic.
- Be prepared for it to be expensive. It probably goes without saying that flipping property is expensive. When you’re making the decision to flip property, be sure that you are taking absolutely everything into account. While a fix and flip loan might help cover the entire costs of the project or a significant portion of the purchase plus the rehab or renovation, there are other costs you need to consider that might be excluded from your loan. This includes things like legal fees, permits, insurance, utility bills, taxes, agent costs and closing costs. Everything adds up so factor all this in when working out your ARV (after repair value) and make sure you’ll be making a worthwhile profit once all the hard work is done.
At Rehab Lend we offer a range of fix n flip loans for first time investors and beginner flippers designed to help you realize your dreams and maximize your profit. To find out more about our fix and flip financing, head over here or feel free to get in touch. One of our specialty lenders will be happy to help.