When it comes to financing options for flipping homes, a fix and flip loan is most likely going to be your best bet. There are, of course, a variety of financing options for borrowers and developers, but there are a number of reasons why fix and flip loans specifically are exactly what you’re looking for.
Below, we’ll take a look at three of the biggest reasons why a fix and flip loan should be your financing option of choice.
Quicker Close Time
One of the things that makes fix and flip loans ideal for their intended use is that they’re able to close much more quickly than a traditional loan. With a regular bank loan it can take a month or more to go from pre-approval to the closing table. With a fix and flip loan, especially at Walnut Street Finance, you can go from offer to closing in as little as a week. This could be crucial if you’re bidding on a property with a high volume of interest and a seller that wants to unload it as quickly as possible. In some cases, especially with properties that need some fixing, an offer that can close quickly may be more enticing to a seller than an offer that brings in more cash - and one that can do both is simply icing on the cake.
Fewer Bank Restrictions
When using a traditional bank to finance a property purchase, the bank gets a lot of say in whether or not you can actually purchase the house. There's more to the process than granting you with the funds based on your credit and ability to repay. They actually appraise the property and determine whether or not they think it’s worth the amount of money you’d like to take out as a loan - including the purchase price and any renovation costs. Even if you have a great vision for a property and are 100% confident that you’ll be able to stick to your renovation budget and sell the property at a profit, the bank probably won’t care. They’re looking at the black and white figures and are generally only willing to finance what the property is worth now in its current condition and today’s market, not after renovations in a potentially different market.
Shorter Loan Terms
With a traditional mortgage it’s fairly accurate to anticipate a 15 to 30 year loan with a fairly reasonable interest rate. When you’re flipping a property, however, there’s absolutely no need for a 15 to 30 year loan, especially if there’s a chance you’ll be hit with early repayment penalties. Fix and flip loans, however, have higher interest rates but much shorter loan terms. They’re also often void of early repayment penalties which means you can sell the property on your schedule without worrying that your lender is going to ding you.
As you can see, there are a number of reasons why fix and flip loans are the ideal financing solution for borrowers or developers that are looking to purchase a property, renovate it, and sell it down the line.