Different Types of Loans for Fix and Flip Investors
When investors are looking into buying a property with the intention to fix it up and sell it for a profit, the types of funding available are different than with just a traditional home mortgage loan. You don’t want to pay more money for the funding than necessary, because the whole point of a fix and flip operation is to turn a profit. It’s a good idea to explore the various manners of funding that exist so that you select what works best for your needs.
Investment Property Line of Credit
One of the ways you can fund a fix and flip operation is by acquiring an investment property line of credit. The difference in this type of loan compared to other funding is that it does not require you to use the equity from the home in which you live. The equity for this line of credit is secured from another investment property. It works similarly to a credit card where you only pay interest on the actual amount of money that you borrow. This type of financing is good for short-term needs and can pay for things like materials for renovations.
Hard Money Loan
Hard money loans for fix and flip investors are helpful when the property being financed is in questionable condition. These types of loans are for a short-term basis and usually pay for the materials necessary to bring the home to profitable condition. Hard money loans require a piece of other real estate property to be used as collateral to guarantee the loan. They can be used to buy the property to be flipped and to pay for the renovations. This works when you expect to have the project completed within a year from start to finish.
Investors can use cash-out refinancing to fund their fix and flip endeavors by using an existing mortgage on another piece of real estate. This process works by creating a new loan and then paying off the current mortgage loan on the property. The equity of the given property is then reset, and it can be used to finance the new project.
There are many options for savvy real estate investors to choose from when considering financing for flipping houses. It’s a good idea to check into each option to see if the terms match your needs. There is plenty of financing available for pretty much any project.