A fix and flip loan is a great way to get financing if you're just starting out in the housing industry. Buying a home, renovating it, updating it, and then putting it back on the market is a great way to make a living or to earn extra cash. However, if it's your first time, you may not have the seed money that you will need to get started. Here are some things to know if you need a boost to get into this industry.
Turnaround
Keep in mind that the turnaround in most of these cases is less than a year. That makes getting a flip and fix loan from a traditional bank almost impossible. Banks make their money from the interest accrued from long-term financing agreements. They don't like having the borrowed amount paid off within a year. To get this type of funding, you'll have to look for a lender who will agree to a short-term deal.
The Right Property
The first step is to find the right property. You'll want to find something that you can get a really good deal on, and it should also be in need of renovation. Keep an eye out for foreclosures or those homes that have been damaged by fire or water. Once you've found the right place, one that you think you can make a profit on, it's time to secure a fix and flip loan.
Have Your Paperwork in Order
Before you head over to meet with someone to discuss securing financing, make sure you have everything in order. Look over your credit score to make sure that the lender won't think that you are a risky borrower. Make sure you have your documents in order to show how much reserve capital you have. You should also be able to verify your income by having pay stubs, a W-2, and tax returns on hand.
Understand the Calculation
Financing is calculated a little bit differently in these cases. Remember, this isn't a traditional mortgage. They will calculate the amount they're willing to front you by looking at your money reserves, your credit, your expertise, and the purchase price of the unit you're going to rehabilitate. They also take into consideration the estimated costs of renovating and repairing the property and the estimated value of the finished product.
Know the Term
Always keep in mind that the term for these deals is usually between six and eighteen months. While some companies will sometimes allow for three-month extensions, you should have a realistic plan in place for completing the rehabilitation and selling the property before your time is up. If you don't give yourself enough time, you could be in trouble.
If you want to get into the home renovation field but don't have the cash on hand, a fix and flip loan may be what you need. However, your chances of securing the financing will be improved if you follow the tips above.
When considering a fix and flip loan, Boston residents visit Conquest Capital Partners. Learn more at http://www.conquestcapitalpartners.com/borrowers/.
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