If you’re eyeballing a prospective investment property to rehab and you need to finance it quickly, you might want to consider a fix and flip loan. As an investment financing option that’s best secured through a broker, this type of loan is excellent if you’re keen to revamp your property portfolio.

What Is a Fix & Flip Loan and When Will You Need to Use One?

Hard money fix and flip loans allow those who are renovating properties to finance their purchase using existing equity. Said equity usually comes in the form of a property, allowing you to secure anywhere up to 90-percent of the Loan-to-Value (LTV) worth. In most cases, fix and flip loans come from private investors and they’ll want to see evidence of your equity’s value in the form of an independent professional appraisal or Broker Price Opinion (BPO).

While most of these loans come with higher-than-normal interest rates, one of the benefits of a private money fix and flip loan is how efficient they are. Borrowers can get access to their funding in as little as three days. As such, they’re an excellent credit option if you’re evaluating the potential profit of a fixer-upper and you don’t want to waste time on traditional finance routes. Although the interest rates are higher, they’re far from unreasonable when considering the high leverage financing and that the property will be undergoing an extensive renovation. You can expect rates from 7.25% to 11.00%, which you should offset if you’re making a wise investment decision. To ensure you’re not heading for financial peril, it’s always advisable to use a broker who can help you navigate the housing market.

Who Would Benefit from Using a Fix and Flip Loan?

Opting for a private money fix and flip loan is ideal if you’re in need of a short-term finance solution. The way in which they’re financed provides you with several layers of convenience. You can make your repayments over a matter of months, although many people do so over a period of six months to two years. In addition, your lenders’ fees and closing costs can come out of the loan if you don’t want to pay out of your own pocket, which can give you additional cash flow flexibility.

Why Might You Choose a Fix & Flip Loan Over Other Forms of Finance?

Aside from their speed and the slightly higher interest rates, private money fix and flip loans are unique in several other ways. Unlike other types of real estate finance, you can ensure you’re repaying your loan until the point you flip the home and no later. For example, if you take the loan out when you start renovations and successfully flip within a year, you can use some of the profits to repay it without any early payment penalty fees. As such, while they carry higher interest rates in the short-term, they act as excellent financial options if you’re a pro at flipping the properties you invest in.

How Can You Obtain a Fix & Flip Loan Through a Private Broker?

If you’re ready to take advantage of the thriving real estate market and you want to open yourself up to multiple lending options, choose a broker specializing in private money lending. Unlike trying to arrange hard money financing yourself, a private money broker will examine multiple avenues, including prospective investors, home equity lines of credit, and 401K funds. From the moment you start working with your broker, they’ll analyze which option will deliver the best long-term results, allowing you to maximize the returns on your investment when the time to flip arrives.

Another key advantage to working with a broker is your ability to work with revolving lines of credit. Thanks to their strong existing networks, brokers can open you up to a revolving line of credit option that you can dip in and out of whenever you feel it’s necessary to. As a result, you can adjust your borrowing and repayment requirements in line with the fluid nature of the property market.

Whether you’ve yet to try a fix and flip loan or you’re reinvestigating the option, remember that multiple borrowing options can help you expand your development efforts. First Capital Trust Deeds can help you explore your fix and flip loan options.

Interested in private money financing and hard money lending?