Fix and flip is really a slang term to describe a type of real estate investment deal. The fix part is where a real estate investor purchases an undesireable single family home below market value and does some repairs to the property in order to make it more appealing. The idea is to significantly increase the market value of the property with the minimal expense possible so that the home can be resold for profit.
Typical repairs done are: adding bedrooms as needed, putting in a new kitchen, finishing a basement, replacing a roof or doing anything required to make a home have more curb appeal to buyers and of course, more valuable then when they started. It is part science and part art to know what repairs to do and how much to spend doing them.
The flip part refers to getting the property listed for sale in a short period of time and then locating a new person that will buy the home to live in it or rent it. This new buyer gets a loan and pays for the property. When the closing happens with the new buyer then the real estate investor, assuming they did the deal right, makes a profit.
Fix and flip investing has been around for quite some time, but it has become much more popular with the advent of TV shows such as Flip This House and Flip That House among others on cable stations.
If you are interested in becoming an investor who does fix and flips, then you have come to the right place! Read on to discover how you can get the money you need to flip properties regardless of your credit, job history or income.
Most properties that an investor buys with the intetion of flipping for profit do not meet FHA guidelines.
Why does that matter?
In order to qualify for "traditional" financing to buy a property, a home must meet these guidelines. Otherwise a lender can't write a loan through Fannie Mae or Freddy Mac. Which means that you can't walk down to your local bank or call up Wells Fargo to have them fund your deals.
The majority of fix and flip loans are financed by private money or hard money lenders. What the heck are those, you ask? Let me explain...
These lenders will loan money based on an asset. In this case, the asset is a piece of real estate. The good ones are people who are (or have been) real estate investors themselves, so they really understand what it takes to fix a property and sell it for a profit.
What private and hard money lenders will do is look at the property you want to invest in. They'll ask you for your purchase price and what repairs you want to do as well. If they can see by the data that an investor can buy a house, do the repair work and quickly sell the home for a profit, they will fund the deal.
The lending decision is based entirely off of the aspects of the property - NOT the borrower. This means that you can get financed if you have bad credit or no credit. You don't have to show job history or prove you have any income or assets.
How can these private and hard money companies do this?
Well, it's pretty simple. Because they are using capital from private investors to fund the fix and flip project, the same lending rules do not apply that do to traditional mortgages.
Something you need to understand about a fix and flip loan is that it is usually for a very short term. Five to Twelve months is common in the industry. Because the loan is short term, many lenders will not ask for payments during the term of your loan. However, you need to make sure you know what you are doing so that you can get the property sold and thus pay off your note. If you fail to do this, you will be foreclosed on and the hard money lender will take control of the property you were trying to flip.
Now you are probably wondering how to locate fix and flip lenders that can help you get going as an investor. So here I'm going to give you a few resources that you can use.
The first way to find a private or hard money lender is to use an aggregation website. These are two that I recommend: http://moolahlist.com and http://www.hardmoneylendersonline.com. They are both good and reputable sources to find a fix and flip lender.
One thing I would caution you against are some of the programs you'll find out there that want to sell you a course on finding private money lenders. In short, don't buy them! They are just a rip off because you can get all the information they provide for free. Trust me, I bought most of them just to find out :).
Another way that you can find people to fund your real estate investments is by networking. Go to your local REI club meeting and get to know other investors. Many of them will move on to funding loans after they've had their fill with doing flips themselves.
Just be warned that this can be a long and arduous process. You have to build relationships and get people to trust that you are worth investing in. That is no easy task! Plus, if you mess up and can't pay off your loan, you'll totally ruin the relationship that you spent all that time and energy cultivating...
The last solution I want to introduce to you today is my company DoHardMoney.com. We've been specializing in doing loans for real estate investors since 2005 and have attained the status of the nation's leading fix and flip lender. The reason we've done so well is that I personally am a fix and flip investor, having been a part of 398 successful transactions (and still counting)!
Our primary focus is delivering fast and easy access to the most fix and flip loan options available online.
So, if you are an investor who is ready to make an offer on a property (or you already have) and you need financing or just want to get pre-approved...
If you are looking for information on how to become a successful real estate investor, for a limited time, you can get a FREE copy of my book & CD.
[ 2016-10-13 21:01:12 ]
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