Fix and Flips – Your Best Options (Updated 2019)
Fix and flip loans or rehab loans are quite popular these days with real estate investors who purchase and renovate a property and flip it for a profit. When an investor needs funding to facilitate a fast closing, this is a very good funding program for house flipping. Hard money loans are generally the most widely used type of financing for fix and flip real estate deals.
Here at Commvestor we have several amazing lender alliances who offer several fix and flip loans for real estate investors that include competitive loan rates for prime borrowers. So why not take a moment now and contact me so that you can get pre-qualified quickly and inquire about interest rates. I can also provide you with other important details about these loan programs for real estate investors. On average these types of loans can close within a couple of weeks. Don’t want a pre payment penalty, no problem we have loan programs for that too.
Typically our hard money lenders would like to work with experienced real estate investors who have at least 2 or more flips. However for those who are new to this then the lenders underwriter would like to see the borrower to be working with an experienced contractor.
Fix & Flip Hard Money Loan
Short term loans that are secured by real estate are considered hard money loans and are used to fund fix and flip real estate deals as the subject property will need to be renovated. Typically the term length of a hard money loan to renovate a property is about one year. This means that the real estate investor and their contractor will need to acquire the property, renovate it and find a buyer who purchases the property within one year.
Many investors who purchase these properties are buying homes that are not in the best of condition and require renovation. A real estate hard money loan is perfect for funding properties that are not in god condition.
Rehab loans are the same thing as a hard money loan, but what is nice about this type of funding is that the approval process has lower qualification guidelines thus assisting real estate investor who do fix and flip rehab projects get funding quickly. The lenders who offer hard money loans are more interested in the property and the value potential of it than they are with the background (credit / income) of the borrower.
Commvestor Funding who has several real estate lender alliances offers funding programs for properties located within the United States. So whether you are experienced or inexperienced let us be your first stop for acquiring money to flip your real estate projects. For prime borrowers you will discover that ore interest rates for hard money loans are very competitive and the prequalification is takes a few minutes. Fill out the form below to get information and rates about our programs and I will contact you shortly.
Who Uses Fix & Flip Hard Money Loans
Experienced real estate investors like to manage their renovation projects and house flippers who are new to this will need to use a licensed contractor.
Hard money rehab loans are for the following:
- Fix and flip investors who have 2 or more completed rehab projects
- New investors who will be working with a licensed contractor experienced in this space
- Real estate investors who are competing with all cash buyers
Hard Money Rates, Terms and Qualifications
First let me say this so that there is no confusing about the hard money loans being offered here. Our company and this website do not offer residential home loans that are owner occupied also known as a “conforming loan”.
So with that being said, hard money loans for residential and even commercial property have a lower approval and qualification process that residential conforming loans. If you purchased you the house you live in, then you know all of the documentation and other hassles that you went through to get approved. Not with hard money rehab loans. It’s a quicker and easier process to invest into a house.
However with risk comes higher pricing than you would generally find with a normal conforming residential home loan. Loan terms are available for 1 to 3 years.
Loan Rates for Hard Money
Hard money loans are used to renovate a property, have a higher interest rate but allow for short term funding to renovate a property and sell it. These loans have fees charged by the lender and are taken out of the loan and the closing costs can also be taken out of the loan or they can be paid out of pocket. I will say that hard money loans are not cheap. They can be expensive when you consider origination, costs, fees and interest rates.
Want to save money on your hard money loan… Then the best way to reduce costs on your financing is to use a no pre-payment penalty loan and pay the loan back early if you are able to. Monthly interest-only payments are paid while loan is active and the principal is repaid at the end of the hard money loan term.
LTV’s (loan to value)
For the most part you can finance 90% of a subject property LTV (loan to value) while also considering the after repair value as well (ARV)
Since the average time to flip a home is around 6 months from what I have seen, you will not be paying interest for a long time.
Qualifying for a Fix and Flip Hard Money Loan
These are usually the minimum that a loan underwriter would want to consider for the approval process…
- They will check your credit and most will prefer a 620 FICO credit score or higher
- They will look at your debt to income ration and usually want 35% – 45%
- Your flipping experience: 2 or more past rehab flipping projects or should be using the services of contractor for those of you that inexperienced fix-and-flip space.
For real estate investors getting a hard money loan is easier when you compare that to all of the other options out there for financing. It would not surprise me to see lenders preferring a borrower to have a credit score north of 640 or higher. This is due to the lenders mitigating their risk. Those with higher credit scores and who have a history of rehabbing properties are a safer bet and may even qualify for lower rates.
Let us be of assistance and help you get started with your new hard money rehab loan for flipping houses.