6 Fix and Flip Financing Options
Fix and flip loans are short-term options for real estate investors. This type of financing allows them to purchase or renovate properties before flipping it to turn a profit. If you’re interested in flipping homes, then you may want to look into fix and flip financing. Here are the six options that you need to know.
Hard Money Loan
A hard money loan is secured by real estate and used to purchase a property and later to renovate it. These hard money loans help a flipper get out from under the house in less than a year. These are ideal loans because they financing properties in poor condition. Hard money loans may also go by the name rehab loans. They have low qualifications for approval and may provide funding in as little as 15 days.
Cash Out Refinance
Cash out refinance is a fix and flip financing option that allows the investor to refinance an existing property to finance the purchase of a new investment. The cash out refinance helps the flipper extract equity from a property. Then, they receive a new loan and pay off the existing mortgage. There are no restrictions on how a fix and flip investor spends the cash out refinance.
Equity Line of Credit
An equity line of credit works like a credit card. The investor receives a line of credit based on the value of their home and uses it while abiding by the credit’s terms. Just like a credit card, the interest rates are only charged on the amount borrowed. Once repaid, the interest is no longer charged.
Property Line of Credit
The property line of credit is similar to the equity line of credit. The major difference is that it can only be used on investment properties. It does work the same as a credit card where you pay interest on what you use. Keep in mind it can only be used on non-owner occupied properties.
Bridge loans are temporary loans that cover the time between two transactions. Investors use them to purchase one property before selling another. Then, you can purchase a fix and flip property without having the contingency to sell your other property.
Permanent Bank Loan
The permanent bank loans and online mortgages are loan terms that last for 15 to 30 years. These are used to purchase long-term primary residences or investment properties that are still in good condition.
When it comes to fix and flip financing, there are many options available. If you know the details of your situation, then you can easily figure out which one is best for you.