There is one thing you will need if you plan on flipping homes — money. You need money to buy the homes and to pay for the repairs, and this is the one factor that often prevents people from starting a home-flipping business. If you are interested in this business but are not sure how to come up with some cash, here are some ideas you could consider.
Getting cash out of your own home is a standard method people use to get started in the home-flipping business. A cash-out refinance is a form of fix-and-flip loan, but it relies only on the equity you have in your own house. For example, if you have $50,000 equity in your home that you can access, you could take the money out to use to get started with a home purchase. Anyone with equity can consider this option, and it works well for many first-time home flippers.
Hard Money Loan
The second option you have for a fix-and-flip loan is a hard money loan. A hard money loan is the most commonly used form of fix-and-flip loan. Hard money loans are short-term lines of credit you can access to flip a house. You may need to have great credit to qualify for a hard money loan, and you may also have to meet other requirements.
If you choose this route, you should ask when the loan is due. There is a good chance that you will have only one year before it is due. If this is the case, you will need to rush through the flipping project to get the house completed and sold to repay the money you borrowed.
One other option you could consider is a loan through a bank. Some banks provide fix-and-flip loans to people who qualify. With this type of loan, you qualify for a loan amount based on what the value of the house will be after you make the repairs. The bank may agree to lend you 80% of the home's value after the repairs or a little more than this. The goal with this loan is to allow you to buy a house, remodel it, and sell it for the price the bank appraised it for when you took the loan so that you can then pay the lender back.
If you have questions about how to borrow money through fix-and-flip loans, talk to a lender to learn more.Share