The 4 Benefits of Fix and Flip Loans
Buying a real estate character, repairing and selling it quickly tends to be a profitable recipe. However, a meaningful part of this recipe to success is access to capital. If one does not have sufficient funds but is interested in rehabbing a character, a hard money lender who offers a fix and flip loans could be a great financing option. These loans are structured in such a way that allow a purchaser to quickly acquire the character and have access to a save of funds for construction and renovation costs.
Buying a real estate character, repairing and selling it quickly tends to be a profitable recipe.
Advantages of Fix and Flip Loans
There are many advantages to fix and flip loans and the need for this source of funding is steadily increasing in the real estate investment industry.
Four meaningful benefits include:
- Quick Approval: Getting approved for a fix and flip loan is a far quicker course of action when compared against the traditional banking system. If the borrower has submitted the requested documents, a private lender can approve the loan within a associate of days while a traditional financial institution can take at the minimum a month. In addition to the meaningful longer wait time for bank loan approvals, the borrower will be required to submit numerous documents and clear multiple conditions as part of the time of action.
- Any character: similarities in varying states of the condition can qualify for a fix and flip loans. Whether the character is bank owned, a short sale, a foreclosure, or in a dilapidated state, a borrower is nevertheless likely to find a hard money lender willing to fund the deal. Once again, a borrower may not have the option of funding these types of real estate opportunities with a bank. edges are very risk averse and have strict rules in place as to what kind of character they can accept as part of their loan portfolio.
- Zero Prepayment Penalties: If you take out a loan from an established bank, you may be hit with penalties should you have the opportunity to pay the loan off before the maturation date. This is called a prepayment penalty. Most fix and flip lenders will not subject you to this fee.
- Repairs Covered: When you buy a character with the intention to flip it, a meaningful portion of your budget will be spent on construction and renovation costs. A fix and flip lender will usually set up a loan save which will cover repair costs of the character in addition to interest. This can alleviate a lot of stress and pressure for builders and developers since they don’t have to worry about spending money out of pocket for repairs or payments.
Teaming up with a substantial lender who understands your character, the local real estate market, and is willing to help you throughout the acquisition, construction and selling course of action is vital. When choosing a hard money lender, keep the following in mind:
- The lender must have sufficient experience in the industry. A private lender that has thorough roots in the real estate investment market will not only be able to offer you a better deal but will also have numerous contacts that will prove helpful along the way – from recommended settlement companies, to permit expeditors and other preferred vendors. This can prove to be a great asset as speed, quality and efficiency is the name of the game in the fix and flip world. The less time you need to use vetting companies and contractors is more money in your pocket.
- Check the history of the lenders to ensure that they are genuine and have a good track record. It may be worth taking a closer look at lenders that entice borrowers with “teaser rates” or a “no documents” underwriting course of action. As with most things in life, if it seems too good to be true – it usually is.
- Finally, you should check out what past or current customers have to say. Is the lender responsive and knowledgeable? How many loans do they have on the street? Do they have good ratings on Google or the BBB? Just as the lender performs due diligence on their borrowers, the borrowers should, in turn, conduct due diligence on the hard money lender. It’s a partnership and both parties need to be substantial and committed to the time of action in order to ensure success.