Fix and Flip Loans: A Guide for Beginners

So, you’ve decided to do some real estate investing? And, after some extensive research, you’ve become interested in the strategy of flipping houses? The strategy consists of, clearly, buying a property, fixing it up to increase its value, and then reselling it for a profit. It can definitely be an amazing thing to do, especially if you’re looking for quick profits, so it is no wonder that you are interested in this particular strategy. 

Of course, in order to do it all the right way, you’ll need to finance the purchase of the property you want to flip. And, since you most likely don’t have that much cash just lying around, waiting to be spent, you may want to consider some hard money loans and thus use those solutions to your advantage.

Those are backed by the asset you are buying, which further means that your credit score won’t play that big of a role in your loan eligibility. That can be a great advantage for many investors, especially new ones.

Anyway, one of the financing solutions you can use is called a fix and flip loan. I suppose the name clearly states their purpose already. But, you still want to get a better idea about what these are, how they work, as well as what the advantages of doing it are and whether you should actually use the strategy to your advantage.

Those are, without a doubt, all some rather important questions. Naturally, you don’t want to make any kinds of concrete moves here, and you want to, instead, get a better understanding of this whole solution before deciding if you want to use it. So, we’ll help you out with that, answering those questions for you below, hoping to help you get your facts straight.

What Are Fix and Flip Loans?

So, what exactly are fix and flip loans? To cut right to the chase, these are short term loans that have been designed specifically to help people finance the purchase and the renovation of a property that they are planning to then sell for profit.

Unlike those traditional mortgage loans, these are tailored specifically to real estate investors, allowing them to meet their goals more quickly, and without getting in debt for a long time. If you’re a beginner investor, here are some tips to get you started: https://www.britannica.com/money/real-estate-investing 

These solutions are usually offered by hard money lenders, private lenders, or some companies specializing in real estate lending, instead of traditional banks. The term of the loan is usually somewhere between 6 and 18 months.

Then, the interest rates tend to be a bit higher than those you can expect on traditional mortgage loans, but those are usually worth it, thanks to all the advantages, and thanks to the short term nature of the loan. 

What Are the Advantages of Using Those?

Speaking of the advantages, you certainly want to know what those are before deciding if you want to use this solution for yourself or not. So, let us now tell you a bit more about the benefits of fix and flip loans, hoping to shed light on what it is that you can expect to get if you decide to go for them. And to understand the general reasons why people use them.

When you are looking to flip a property, you know that any opportunity that comes by can definitely also go by rather quickly. Meaning that, if you don’t grab it soon, someone else will.

And, fix and flip loans help you grab those opportunities quickly, given that the processes of applying and getting approved are pretty fast, much faster when compared to traditional mortgages. In short, you can get your money in as little as a week, and it is precisely this efficiency that makes the loans so appealing.

Furthermore, as I’ve mentioned above, all hard money loans, including this one, are asset-backed. This means that you can use the fix and flip borrowing solution even if you don’t have such a great credit score, because the emphasis is not on that score, but on the property you’re thinking of buying and flipping. 

Another great thing about this solution is that it will also cover the renovation costs. So, you don’t need to worry about any out-of-pocket expenses. You fund your investing project with this option from start to finish, and then you simply enjoy the profits once the property is sold.

One more thing to know when speaking of the advantages of this solution. Basically, since these are offered by private lenders, you can expect them to be more flexible when offering the specific loan terms, such as the repayment scheduling and similar. In short, you will work together to find a solution that works best for you, and you can, thus, customize the repayment schedule to suit your preferences. Every borrower is in a different situation, and these lenders will work to accommodate you.

Should You Use Them?

Now that you’ve understood the advantages, you’re wondering whether you should really use this solution for your needs or not. Well, that decision is yours to make.

But, if you’re looking for a quick funding solution that will allow you to grab those fix and flip opportunities in the world of real estate before someone else does, while providing you with flexible repayment terms and generally borrowing terms that will be tailored to you, then this is undeniably the option to consider.