A fix and flip loans, or sometimes called a rehab loan, can help with the purchase, refinancing or renovation of a real estate investment property. Buying, renovating, and reselling homes can be a great source of income. However, it takes sufficient capital to fix and flip a home. You need cash to purchase and renovate the property. You need cash to pay for all the taxes, utilities, insurance, and interest accrued from the time of purchase, through renovations, and up until the day you sell or rent it.
The borrower receives payment at closing and the remainder of the loan is paid out in installments as the renovations are completed. In most cases, lenders will use the property as collateral for the fix and flip loan, and underwrite the project by comparing the size of the loan to the value of the property after repair (i.e, “After Repair Value” or “ARV”).
A Bit About Loan Costs
Fix and flip loans for flipping projects are more expensive than home purchase loans. The interest rate is higher, and you may have to pay several points or origination fees.
Flipping projects are short-term projects. You’re not going to live in the home for decades, so a standard 15-year or 30-year mortgage isn’t the right loan for the job. Investors often prefer to buy, improve, and sell a property within one year or less, and that’s how most private loans work. Those loans get expensive if you hold a property for a long time, and that makes sense because the lender’s risk increases as you delay repayment.
How much does it cost to borrow for flipping? Costs are all over the board, and everything is negotiable. Interest rates might be anywhere between 8 to 20% per year, and you’ll have to pay 1 to 10% upfront. The longer you’re in business, and the better your relationships with lenders, the less you’ll pay!
A private lender, on the other hand, has expertise with these types of projects and specialize in funding fix and flip loans – quickly, with flexibility, and dependability. Great deals go quickly! Choose a private lender who understands your project, is quick, flexible and dependable – choose Real Estate Funding Solutions! Give us a call at 1-855-913-8637 or send us an email at info@realestatefundingsolutions.com to let us help you get started today!