Flip & Fix Loans

Easily get into flipping real estate with a fix & flip loan to cover the renovation costs. This short-term financing option is an excellent way to increase your property earning potential with minimal outlay.

Overview of Fix & Flip Loans

 Our fix & flip loans provide real estate investors with the capital needed to purchase, renovate, and sell a property for profit.

There are various types of these, from those that use your primary residence as collateral to hard money loans for those who’re unable to secure alternative financing. Fix & flip loans are “interest-only” agreements, meaning that the monthly repayments are kept to a minimum. The basic premise is that you find a house or multi-family property that needs some work—perhaps cosmetic or more serious, structural elements—take out a short-term financial agreement (AKA, a fix & flip loan), get the work done, and sell the property on. The loan amount is then subtracted from the final sale price and whatever is left over is profit.

How Fix & Flip Loans Work

Whichever type of fix & flip loan you go for, an evaluation of the ARV (after repair value) will be made. This, along with the purchase price, are the two most important factors that lenders will evaluate. 

The amount borrowed generally can’t exceed 75% of the ARV. This can be made up of anything up to 90% of the purchase price and 100% of the refurbishment / remodeling / renovation costs. There are two elements of a fix & flip loan—the purchase and the rehab.

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The purchase phase: Find your property and submit your application to an appropriate lender. You’ll need proof of income, how your deposit is to be funded, and various other documentation that we’ll advise you of when you first enquire. Very importantly, you’ll need to provide us with a business plan that details the various phases of the renovation and expenses involved. This is called the Scope of Work (SOW). 

The rebab phase: Once work commences, the funds are released to cover the first phase as detailed in your SOW. As each phase is completed, you then draw down further costs from the loan. We’ll send out an inspector to oversee the finish of each stage before approving the money for the next phase. This way, you work through each rehab systematically until completion.

Different Types of Fix & Flip Loans

Fix & flip loans come in different guises, such as:

  • Home equity line of credit (HELOC): For those who have a minimum of 15% equity in their family home.
  • 401(k) or IRA loans: For those with a decent retirement pot but are not yet nearing retirement age. The profits go back into the account to boost your retirement fund.
  • Seller (owner) financing: The person selling the house you wish to buy and flip acts as the lender, with you making payments to them (+ interest).
  • Hard money loans: Short-term loans made by individuals or companies that use the property as collateral. Most suitable for those who can’t access more traditional methods of financing.
  • Business line of credit: For experienced flippers, this flexible loan comes in both secured and unsecured options.
  • Personal loan: Suitable if you only require a small amount of funding.

Due to the complexity of the different types of fix & flip loans, it’s important to take advice from a trusted legal advisor before signing any agreement.

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