Fix and Flip: Loans for Renovating Properties
Fix and flip loans are a type of hard money loan designed for people who buy distressed properties with the intention of rehabilitating and reselling them for a higher value. These are short-term loans for people who expect to buy and resell a house within a nine- to 12-month period. A fix and flip loan allows you to apply for money to cover a significant portion of the cost of purchasing the property, plus the cost of the renovations you plan to do.
Get Quick Financing With a Fix and Flip Loan
Because you want the time period between buying and selling to be as short as possible, the goal is to start renovation work on the house as soon as closing happens. Because fix and flip loans are a type of hard money loan, the cash becomes available to you more quickly than it would through other loan types, like mortgages. This quick cash gives you the freedom to start renovations as soon as possible.
When you’ve found the property you want to flip, you need to move fast. Distressed properties are sometimes sold at auction. They may be the cheapest listing in a neighborhood. People who can get to closing quickly are at an advantage in the competitive house flipping market.
How Fix and Flip Loans Differ From Traditional Loans
These hard money loans stand out from traditional financial loans in several ways. The details will depend on your situation, but fix and flip loans have these convenient qualities in common.
Easy to Access
Hard money loans are usually easier to qualify for. They have higher interest rates because lenders are taking a bigger risk, but those interest rates bring advantages with them. Private lenders often don’t need the same in-depth financial assessment that banks and credit unions conduct when offering a loan because the property itself acts as collateral. Private lenders will accept lower credit scores and little or no money down for a fix and flip loan too.
Same Day Loans
Because you don’t have to provide a detailed financial history and don’t need to work to get your credit score up, you receive loan terms much faster than from traditional lenders. The time it takes for a private lender to evaluate your application, the property you want to purchase, and whether you can make the monthly payments can happen as quickly as a single day.
Private lenders can be more flexible with their terms than traditional mortgage lenders. You have the opportunity to work with your private lender on the terms of your fix and flip loan. Negotiate the loan that fits your next project by discussing the interest rate, the down payment, the time period of the loan, and the exit plan. Though the property you’re purchasing is typically the loan’s collateral, you have the option to negotiate putting other assets up as collateral as well.
Applying for a Fix and Flip Loan
Your first step is to pre-qualify for the loan. Quick Lending will run an initial report on the property you want to buy. This report helps assess the risk involved with offering the loan by looking at the expected sale price after repairs and comparing it with the current sale price.
You also provide a short financial history, usually encompassing the past 60 days; a government photo identification card; your renovation plans for the property; and the purchase contract.
Once you’ve pre-qualified, your application moves into pre-authorization of payment. The property needs to be appraised, and you may have to provide estimates from the contractors and repair people who will be doing your renovation. When the loan is officially offered, you sign the terms and conditions.
Your Experienced Fix and Flip Lender
Whether this is your first fix and flip loan or your hundredth, Quick Lending looks forward to getting you the hard money loan you need. At Quick Lending, we guide you through the entire process, talk you through fees and interest rates, and will answer all your questions. Contact Quick Lending today to get started.