What Loan Terms Are Ideal for Fix and Flip Loans?


Do you want to start a venture in the fixing and flipping segment but don’t have the required amount of funds, to begin with? Well, in that case, it’s best to opt for a loan.

Why, though?

Well, when it comes to fixing and flipping, you’ll have to buy an unfurnished house. And although it doesn’t require a massive amount of money, you still can’t start at zero. I mean, buying the property isn’t the only issue here, you know?

In addition, you’ll also need to repair, paint, and do some more work on it before it’s ready to be sold. And, for that, you might need quite a lot of cash. Loaning, that’s the best solution.

So, how do you get it?

Why Should You Take A Loan For House Flipping?

Fix and flip loans, in essence, are a type of short-term credit that’s intended to aid you in getting a property instantly. Unlike a traditional loaning system, Texas flip and fix loans usually:

  • Have a flexible term. Therefore, you won’t have the headache of returning the money as soon as possible. There won’t be unpredictable processing available here as well.
  • Get approved much faster than usual. In truth, once you’ve filed your documentation for the loan, you’ll get your money within a week or so. No muss, no fuss.
  • Allow you to buy more than one type of property. And, yes, the condition of the house isn’t going to matter as well, as long as you’re selling it for a profit.

Finally, there isn’t any prepayment penalty available in this aspect as well. Therefore, even if you make a profit from selling, you’ll get to retain it without asking any questions.

Which Loans Are Ideal For House Flipping?

When talking about taking out a loan for house flipping, you’ll find more than one alternative available out there. Here’s what you need to know about them.

Option – 1: Hard Money Loan

The terms of a hard money loan are a little trickier or more expensive than a traditional option. But, the interest rates are a little lower than usual. And, what’s more, is that you’ll get two to five points depending on the lender. Here’s how it works.

If you’ve borrowed USD 100,000 from someone and received a 5-point charge, you’ll need to pay 5% of the money. And, unlike the traditional system, you’ll be exempted from paying the other USD 95,000 as long as you don’t sell the house. Pretty flexible, no?

Option – 2: Private Lender

A private lender, in essence, is a wealthy individual who has a substantial amount of money to offer you financial support. They function quite like a hard money lender and, thus, aren’t too interested in qualifications or something as such.

A private lender also charges a much better interest rate (around 8% to 12%). Additionally, the points they offer (0-2 points) are pretty low as well. 

However, the real challenge here would be learning the distinguishable differences between a real lender and a con artist. Hence, in this aspect, it’s always best to go for a reference rather than trying to find someone in the market accordingly.

Option – 3: Cash-Out Refinance Loan

A cash-out refinance loan, in essence, is a brand new mortgage on your property for a much higher amount than you currently owe. In this aspect, you can refinance your house’s current equity to fund your home and repay the loan.

And, if you can save a certain amount of money from it, you’ll be able to put it all into your new investment. But, remember – the cash-out refinance loan isn’t going to be cost-effective as long as you don’t have 30%-40% equity in your property.

So, don’t forget to keep an eye on the risks before you make a move in this aspect.

The Bottom Line

When it comes to taking a house-flipping loan, you’ll get more than one option available out there for you. However, before you select any of them, don’t forget to go through everything as closely as possible. It might also be helpful to tap into your network and get some reliable information about a lender before making an investment.


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