You can point the finger at HGTV, the turbulent housing market, or the current trends in the home design industry—but one thing is for certain: the popularity of house flipping is at an all-time high. An exponential amount of savvy real estate professional investors are purchasing ‘fixer-uppers’ with the intent of flipping them over a short timeframe and pocketing a substantial return on investment when it’s all said and done. If you are also considering hopping on to the appealing fix and flip financing bandwagon, you are far from alone. Over ten percent of all real estate transactions in the past year consisted of fix and flip projects. But what you may be wondering is how do you go about financing these sort of deals? Prior to the explosion of the flipping trend, a significant percentage of homebuyers were using out-of-pocket funds to pay for their investment properties. Now, with more new flippers eager to break into the market, more and more potential flips are funded using several different types of loan packages. Which option is best for you? Below is a quick overview of some of the most commonly used funding approaches when it comes to fix and flip investment projects.
Cold hard cash may sound somewhat archaic or ‘old-school’ but it still reigns supreme when it comes to funding real estate deals. The only problem is that many new investors simply do not have the financial assets to do so. If you are fortunate enough to have adequate cash, utilize it before going into debt. House flippers in debt are more likely to pull the trigger too early when it comes to reselling, which may negatively impact their return on investment. Accordingly, if you have the flexibility to save up for a few months prior to purchasing your fixer-upper, do so. This will ultimately put you in the driver’s seat when it comes time to resell your property—allowing you to wait if necessary for the market to reach prime conditions. If you’ve accrued equity on your primary residence, you can potentially fund your flip with cash via cash-out refinancing. This allows you to take out a portion of the equity you’ve established and added it to your standing mortgage. The subsequent cash-flow can then be used to purchase or rehab a secondary property.
HARD MONEY LOANS
Real estate investors are much more likely to contemplate using alternative or ‘non-traditional’ funding options for their rehab or flipping endeavors. If you are experiencing difficulties obtaining approval for conventional loans or would simply prefer a more easily-accessible and flexible form of funding, consider reaching out to a private money lender such as Express Capital Financing. We don’t require a crazy high credit score. We are more interested in both your track-record as an investor and the viability of your potential fix and flip. Sound intriguing? There’s more. Our loan packages can be closed in a fraction of the time that it takes conventional lenders to get you the money you need. This gives you a leg up on the competition in what is fast becoming a crowded marketplace. Having the peace-of-mind knowing that you have the requisite funds to submit an on-the-spot offer when you come across the ideal property–and doing so with the full support of a collaborative and flexible lender to coordinate the best loan that works for you, whether it is through a form of bridge loan or cash-out approach—goes a long way especially when you are just getting established in this challenging industry.
Express Capital Financing is a nationwide hard money lender that provides financing for a variety of loan programs, including fix and flip loans to real estate investors. If you are a new or experienced investor, we’d love to learn more about your fix and flip deal to see how we can work together.