What You Need To Know About Fix And Flip Loans

If you want to get into flipping homes, a traditional mortgage may not be the right fit for your financing needs. Investment property loans work differently than conventional home loans. If you are looking to fix up a residential property to later sell for profit, you need financing that covers the purchase of the home and the repairs and renovations. Fix and flip loans are an excellent option for this type of real estate investment, but here's what you need to know about this type of financing.

What Are Fix And Flip Loans

The first thing you should know about fix and flip loans is how they work and differ from other types of home loans. Even if you find a complete bargain on a property, unless you have the cash to buy and fix it up, you'll need to finance. Fix and flip loans are short-term loans and typically have higher interest rates and are intended for investment properties. While conventional mortgages offer better terms, they may not provide the funding you need to renovate. Most traditional lenders are also hesitant to lend to investors since flipping can be a risky undertaking.

Where To Find Them

Getting fix and flip financing from a traditional lender isn't a likely scenario. Instead, you will need to look at hard money lenders for your financing needs. You can find hard money lenders online and through other flippers. It's also important to note that hard money lenders tend to consider different factors than traditional lenders when determining whether to approve your loan. Often, hard money lenders will look at your reputation as a flipper and the potential of the property you want to fix up when deciding whether to approve your loan. 

You Need To Do The Math Before You Commit

If you want to use fix and flip financing for your real estate investment, make sure you do the math before committing. A fix and flip loan is there to tide you over while you are working on your investment property. However, high interest rates and loan terms of less than a year can make this type of financing expensive. If your renovations take longer or you have trouble selling your investment, it can lead to a tricky financial situation. Make sure you are ready for this financial risk.

If you are considering fixing and flipping a property, this is what you need to know about fix and flip loans. First, knowing how fix and flip financing works is crucial. Second, there are many hard money lenders out there who may want to work with you. Finally, make sure you do the math and know what risks you are taking before committing.