You’ve been watching a lot of fix and flip TV lately and you’re feeling inspired. You think you have what it takes and you’re ready to embark on your own fix and flip journey. But where do you begin?
The first step in the fix and flip journey is to find financing for the project. Luckily, there are many options available. How do you know which is the best for you? Let’s take a look…
Option #1: Hard Money Loans
Real estate hard money lenders offer speed, flexibility and opportunity - unlike traditional banks. Even if you do not have a pristine credit profile, a hard money lender will still review your project and help identify the best option for you so you don’t miss your chance.
Option #2: Home Equity Loan or Line of Credit
If you have built home equity, you could take out a home equity line of credit. Your home will be used as collateral for the line of credit. Similar to a credit card, you will be required to repay your outstanding balance over a fixed term, and usually a fixed interest rate. You can also draw against your line of credit whenever you need additional funds.
Option #3: Traditional Bank Loans
Obtaining a fix and flip loan from your bank is very similar to applying for a conventional mortgage loan. You determine the loan term, how much you can put down, and all the risks will lie with you. It sounds simple, but it’s not always the case. Good credit and a proven track record of successful flips are typically required.
Option #4: Private Lending
“Private money” generally refers to funding provided by a family member, friend, business partner or other acquaintance. Private money comes from a source that isn’t typically in the business of providing loans. There are always pros and cons to this type of loan. A private money loan could be much more flexible, but are often times hard to come by.
So which financing option is best for your next fix or flip project? Consider all the options and do your research!