5 Options for Fix and Flip Real Estate Loans
When it comes to fix and flip real estate, buying and renovating a home for a profit is a lucrative business. In order to make your dreams come true with this form of real estate flipping, however, you have to be able to qualify for the right funding. These types of projects don’t tend to get conventional loans. Instead, a few different types of loan specifically address the complexities of flipping homes for business.
Hard Money Loans
Rehab or hard money loans are short-term loans for real estate investors to take advantage of using. These are not like traditional bank loans and are instead issued by private lenders. Hard-money lenders can be an individual, licensed mortgage broker or a group of investors. The most common term is about six months to one year. Still, they are able to go up to as much as five years.
Cash Out Refinance
One Financing option that you have for your fix and flip home is to use a cash-out refinance. This allows you to tap the equity in your home. You refinance your mortgage and take the difference from what you currently owe. The amount of your new loan will be how much you owe on your mortgage, plus the cash that you take out. To qualify, you need to have a higher credit score. Generally, you need about 640 to qualify.
Line of Credit
With a line of credit, you can use the equity of your residence as collateral. Then, you access the money in smaller chunks over the lifetime of the loan. You can also apply for a home equity loan that allows you to borrow against your home. This type of loan offers a fixed interest rate that stays relatively low. In addition, your interest is tax-deductible.
Investment Line of Credit
This is also called an acquisition line of credit. It is a short-term financing option that lasts up to 24 months. It allows you to borrow the cash that you need. If you have experience flipping houses, then this is the type of loan you need, as your approval is based on your record of flipping homes.
In the internet age, crowdfunding continues to gain traction. This is peer-to-peer lending where funds are raised through contributions on the internet. Some companies will fund a larger percentage of loans than others, but the loan terms tend to be around 12 months.
If you’re ready to embark on a fix and flip real estate journey, then it’s important to know what type of financing options are available to you. These five loan options can help you turn a profit from your real estate.