3 Ways to Realistically Finance Your Next Fix and Flip
Looking for your next fix and flip and want to know all your financing options? Don’t be so quick to hand your money over to the first lending solution you come across. You’ll want to make a strategic decision here that’ll minimize how much you spend and maximize your profits.
Here, we’re outlining all the best and most realistic ways to finance your next fix and flip, matching the pace and purpose of your investment.
Use Hard Money Loans to Move Fast
For most people who flip properties for a living, hard money loans are the go-to option. The best hard money lenders will approve your loan within a matter of hours, offering flexible terms and funding that actually lines up with the condition of the property.
The unique thing about how hard money lenders operate is that they base their decision (whether to approve your loan, and how much money to lend) on the value of the property itself, not your credit score or income history. That makes this financing option a good solution if your credit history is poor and you’d be unlikely to get approved for a traditional bank loan.
Because hard money lending is so quick, you’ll have the speed to move fast—for example, competing with cash buyers for a distressed property with potential at an auction or jumping on a deal before it hits the wider market. You will have to pay more in interest for hard money loans, but you’re trading this off for speed and access.
Tap Into Equity You Already Have
If you’re a seasoned flipper or, at least, you’ve done one flip before, you might have equity sitting in a past project that you can tap into through cash-out refinancing or a home equity line of credit. This is a good option to consider if your current property is finished and gaining value, and you want to roll that gain into the next one.
You’ll need good credit for this option, not to mention a property with enough margin to pull funds out from it. But if you meet the criteria, it’s one of the cheapest ways to fund your next project without having to get outside lenders involved.
Partner with a Private Investor
Let’s say you like the sound of real estate investing, especially the hands-on work involved, but you don’t have the cash to make it work. In this case, you might want to bring on a silent partner or equity investor who can provide the funding, while in return, you handle the renovation and sale.
This is something that only really works well if you have a track record and can prove the results you’ve already achieved. Otherwise, you’ll probably struggle to find someone who’s willing to pay you upfront cash, even if you’re offering a nice cut of the profit.
Make the Money Work
Even if you’ve got your eye on the most profitable project in the world, it’ll all be for nothing if you can’t fund it.
Make sure you’re well aware of all your financing options, and choose the best one to keep your projects moving and your profits growing.
