Have you always been liking the real estate business?
Do you feel passionate about properties, houses, and apartments?
You can start your real estate journey with fixing-and-flipping houses. Here, you do not need to invest a lot of time and effort like building a property and then searching for potential buyers.
You just need to buy old properties or houses, fix them and make them look almost new and sell them. It might seem a really easy task, but in reality it often feels more hectic than building a new building or residential complex.
The most critical part is market research and managing money.
The market research part totally relies on your hardwork and determination. However, when it comes to collecting funds, taking loans from financial institutions is the simplest option.
But when you are planning to go for fixing-and-flipping, you can not take the usual bank loans. You should opt for hard money lenders.
When it comes to fixing and flipping houses, there’s quite a lot of money involved, especially if you can do it well. However, if you’re just starting out, you may encounter a fiscal barrier. It will be even more prominent when you’re fixing a rather broken and dusted house.
So, what’s the solution?
There was a time when you had to provide all the money from your own pockets. Hence, if you didn’t have enough cash, it’d be almost impossible for you to get into the business.
Now, the scenario has become quite easy-going, as you can simply take a fix-and-flip loan or hard money loan. It can help them get started in the market quickly.
Fix And Flip Loans – An Overview
A fix-and-flip loan, in essence, is a type of short-term loan that can help a real estate business person buy and renovate a property. This, in turn, can help them sell the house within a year or two at a considerable amount of profit or dividend.
Most people tend to use the titular loan to purchase a residential property at a foreclosure or an auction to finance an upgrade. But, in some cases, it can also be used to cover other expenses associated with the property’s ownership.
The Difference Between Traditional And Fix-And-Flip Loans
Both the fix-and-flip and the traditional home loan are included in the segment of real estate. However, at their core, they’re pretty different. Here’s what you need to know about it.
|
Subject |
Conventional Home Loan |
Fix-and-flip Loan |
|
Interest Rate |
2% to 4% |
12% to 18% |
|
Duration |
15 years to 30 years |
6 months to 18 months |
|
Collateral |
The property and the personal credit of the borrower. |
The property or house in question. |
|
Purpose |
Long-term investment |
Short-term investment |
Unlike a fix-and-flip loan, a traditional option is more of a long-term investment. Hence, it would help if you only opted for it when you’re buying a house to live there for a prolonged period.
Why Should You Opt For A fix-and-flip loan?
A fix-and-flip loan can be quite advantageous for a business person in various aspects. Here are a few of them.
● Lower Risk: When you’re taking a traditional home loan, you have to back it up with your property and personal credit. Hence, if the worst comes to the worst, you may end up losing your house. However, that doesn’t happen in the case of a fix-and-flip loan, as you’re only backing it up with the property you’re buying. Thus, the risk of losing anything will be pretty low in this regard.
● Fast Funding: When you’re bidding on an auctioned property or foreclosure, you’ll need to have cash on hand as quickly as possible. However, a conventional loan can take a month or so to deliver or process. But, if you’re opting for a fix-and-flip loan, it will provide you with whatever you need within a week. Therefore, there’s no need to wait for a delay or anything else.
● Flexible Terms: An individual or organization providing a fix-and-flip loan will not be tied to a rigid procedure or structure. There’ll not be a plethora of requirements for the same as well. Hence, even if you don’t qualify for a conventional loan, you’ll indeed be recognized for a fix-and-flip loan. Just make sure to provide the proper paperwork, and you’ll not have to worry about anything else.
FAQs – Frequently Asked Questions
In this section, we’ve offered a few more insights on the subject of the fix-and-flip loan in a question-answer format. Hopefully, it will help you clarify everything as much as possible.
1. How Can I Become A Flipper With No Money?
When it comes to starting out in the fix-and-flip real estate industry with no money, you’ll have to opt for a private or a hard-money lender at first. If you don’t think they are the best options for you, we’ll ask you to go for wholesaling or home equity.
2. Are Fix Flip Loans Interest Only?
If you’re paying off the loan in a monthly format, then the whole prop will be interest-only. In this aspect, you’ll have to pay off the principal amount at the end of your term.
Getting Started With Fixing And Flipping
Now, we’ll be concluding our article. Nonetheless, before we go, there’s something else we want to tell you.
The segment of fix-and-flip is quite tricky. Hence, if you’re just starting out, we’ll ask you to talk to someone who’s experienced in this front. Hopefully, it’ll work out perfectly the way you want in the end!
