Fixing and flipping properties can be one of the best ways to earn a return on investment in real estate. It is a great way to quickly add value to a property so that you can sell it for a profit without having your capital tied up in a particular property for too long. However, financing such projects can be difficult with traditional loans. The following fix and flip loan options may be helpful.
A hard money loan is a type of short-term loan that is secured by real estate. You can use it to purchase and renovate a property. In many cases, lenders will offer a percentage of the after-renovation value of the property. In other words, you can borrow against the estimated value of the property when you are done renovating. That means that you will usually have more money for renovation.
The interest rates of hard money loans are usually somewhat expensive. However, they are intended for short-term borrowing only. Additionally, you may be able to defer some or all of your payments until you sell the property. Typically, these loans have relaxed qualification requirements.
If you own existing property, you may be able to refinance it with a cash-out mortgage. This will give you some cash to help with financing another property. Naturally, this can be somewhat risky because your primary residence can become involved with your fixing and flipping project. However, it can also help you to get very low interest rates and fees. Plus, this is very accessible if you have equity in your current property.
Line of Credit
You may be able to take out a line of credit to help you flip a property. In this case, you can potentially use it for multiple projects, depending on the credit limit you are able to get. Lines of credit work somewhat line credit cards. You have a maximum balance you can carry at a time. Within that limit, you can take out whatever you need and pay it back when you like (although you need to make minimum payments).
In some cases, you can use your equity in other real estate to secure your line of credit. In other cases, you may be able to use the property or properties you are buying to secure the credit line.
Discover more about fix and flip financing today. Doing so will help you to ensure your real estate returns.