How To Get Funding for Fix and Flip Properties
Getting started in the fix and flip industry is a great way to create a steady income. However, unless you’re planning on paying cash for every property you want to fix up, you’ll need to find a way to finance your purchase. There are many different ways to finance fix and flip properties, but if you’re not sure where to start, you can end up with a bad loan that costs you more than you’ll make. Here’s what you need to know to finance your property without breaking the bank.
Look at Your Personal Finances
When you’re getting started in the industry, lenders will always look at your personal finances before deciding whether they’re willing to give you a loan. Before you apply, take a look at your finances and credit score to see where you stand. Lenders prefer to work with borrowers that have credit scores greater than 650 and at least some cash upfront to use as a down payment. The more money you have saved up for the purchase, the easier it will be to get a good loan. If you’re not happy with your personal finances, try to improve them before you apply for any type of loan.
Look Beyond Conventional Mortgages
You can use conventional mortgages to finance a fix and flip project, but that doesn’t mean you should. These loans have terms of 15 to 30 years and give you small payments each month, but they’re meant for people that plan to live in the house for several years at least. If you’re planning to sell the property in a few months’ time, look into private loans. These loans feature higher interest rates, but they’re easier to qualify for. Private lenders will look at the value of the property itself rather than basing their decision on your finances alone. If the property is worth their investment, they’ll give you the loan. Remember, the property you’re buying guarantees the loan. If you fail to repay it in full by the end of the loan’s term, the lender will take possession of the house to settle your debt.
Work With an Investor
Loans aren’t the only way to pay for a fixer-upper. You can always leverage your network and work with a more experienced real estate investor that’s flipped properties in the past. Ask around, talk to real estate agents and partner with someone you’re confident in working with.
Financing a fix and flip property is easier than you think. Keep these tips in mind and you’ll be able to finance your fixer-upper quickly.