The Skinny On Fix And Flip Investing
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 than 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.
Need Money for Your Deal?
How To Get Fix And Flip Loans Even If You Have No Credit
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.
Here’s Where To Find Fix And Flip Lenders
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
Investor Testimonials:
Casey Carrol – Net Profit $71,000
Laura Rider – Net Profit $56,000
Nathaniel Gibbs – Net Profit $20,000
Loan Terms
100% Financing
YESIf your deal is good enough we will cover 100% of the purchase price, rehab, and closing costs, points & interest.
LTV Basis
ARVOur max loan amount is based on the after repair value, not the current value or purchase price. If the numbers line up, we will fund it.
Maximum LTV
70%We lend up to 70% of the ARV. We will fund everything but earnest money as long as it fits within 70% of the ARV.
Max Loan Amount
$250KOur max loan amount is $250,000. For the markets we currently lend in, we’ve found this to be the sweet spot for real estate investing.
Minimum ARV
$70KOur minimum ARV to lend on a property is $75,000. If it’s less than that there is just not enough profit to make it worth the effort for either party.
Multiple Deals
YESYes. We allow you to do 3 deals at a time, enabling you to stay busy and rake in even more profit at a faster pace.
Interest Rate
1.25%/MOOur interest rates of 1.25 – 1.50% per month fall pretty middle of the road. We are not the cheapest, nor the most expensive, but our 100% financing options allow you to leverage our money.
Origination Points
5.5%We take on significant risk in offering 100% financing and our points of 5.5% – 6.5% is what keeps us in business.
Max Loan Term
5-MONTHSThe default loan term is set at 5 months, but we do allow up to three 1-month forbearance payments equal to 1.0% of the loan if you need more time.
Monthly Payments
NONEWith no monthly payments during the initial loan term you can focus 100% of your time on rehabbing and selling the property.
Minimum Credit
NONENone. A bad credit score will affect your points and interest, but because we lend on the property’s after repair value it won’t keep you from getting a loan
Min Cash-to-Close
$0.00We do not require a down payment on the property. If everything fits in 70% of the ARV you can come to the closing table with $0.00.
Pre-Pay Penalty
NONEWith no pre-payment penalty, fixing and flipping the property in a shorter amount of time can only deepen your pockets.
Required Experience
NONEMany other lenders either won’t lend to you or will jack up their prices unless you have prior experience, but we’re all making profitable real estate investing accessible to anyone.
Gap Financing
ALLOWEDWe allow gap financing in the form of business lines of credit to help with cash-to-close when everything doesn’t fit in 70% of the ARV and we can help you get up to $100,000 in as little as 30 days.
Foreclosure Protection
PROPRIETARYNobody else looks out for you like we do. We offer proprietary protection that nearly precludes the possibility of a foreclosure on your records even in the worst-case scenario.
Refinancing Available
AVAILABLEYes. With traditional lenders limited to strict loan parameters, we focus on equity over borrower financials. This gives you the liquidity needed for your individual situation.
Full Disclosure
YESUnlike a lot of other lenders who hide the full cost of the loan until it’s too late… we want you to know what you’re getting into and disclose ALL costs upfront.