There are many financing options available for buying a home, but what about buying a house that you don’t intend to keep around for the next 15 to 30 years. If you’re looking for financing to begin flipping houses, you’ll need something a bit different than a standard mortgage with a substantial down payment.
Consider these options when you’re looking for the right financing opportunity for you.
Hard Loan Options
There’s a lot of speculation when it comes to defining the term “hard money,” but the overall consensus is that it means “harder” terms and conditions with the loan. Each loan application comes with its own set of expectations. But generally, hard money loan options have high expectations of the person gaining financing and high expectations concerning collateral.
The great benefit of fix and flip financing with a hard loan is that it is more focused towards investors. The higher expectation of collateral and stricter loan requirements make it an excellent opportunity for the fixing part of a fix and flip operation.
Additionally, they usually have terms that expire in less than a year and arrange for points to be paid upon the sale of the house. This option was the original house flipping loan.
Private lenders are making a comeback as investors often prefer to work with people who specialize in this type of funding. There are many local, private lenders available at real estate networking events.
Private funding usually comes with similar terms to hard loan options, but you have a lot more negotiating power when it comes to finalizing a deal. There’s also the notion that you have more options as you can find other private lenders if you don’t like the first one you meet.
The issue that comes with private funding is the vetting process. You may want to and any private lender you meet for a list of other fix and flip investors they’ve worked with through the years. This information will give you some reference to the turnaround times and a sense of urgency the person has.
In recent years, crowdfunding has become very popular among to kickstart your fix and flip operation. Top notch crowdfunding sites for getting your fix and flip operation include Groundfloor, RealtyShares, and AssetAvenue. Each site has a different set of values and various potential drawbacks as well.
Overall, crowdfunding is a popular but slower method of gaining financing. Typically, a lender could close in as little as 24 hours. But, within the crowdfunding realm, you might spend weeks negotiating preferable terms.