What Are The Ways To Finance A Fix & Flip Loan?
When it comes to financing a fix and flip loan, there are a few options available to you. The most common form of financing is through a hard money lender. Hard money loans are typically short-term loans that are backed by the value of the property being purchased, rather than your credit score.
Other options for financing your fix and flip loan include private money lenders, home equity lines of credit, and even credit cards (although we don’t recommend this option).
In this blog post, we’ll go over the pros and cons of each type of financing so that you can make the best decision for your next fix and flip project.
Hard Money Loans
Hard money loans are loans that are typically given by private investors or groups of investors. The loan is then secured by the property itself, rather than your credit score.
One of the main advantages of hard money loans is that they can be approved very quickly – sometimes in as little as 48 hours. This is because the loan decision is based on the value of the property being purchased, rather than your financial situation.
Another advantage of hard money loans is that they tend to have shorter terms than traditional bank loans – typically 12 months or less. This can be beneficial if you want to sell the property quickly and don’t want to be saddled with a long-term loan.
One downside of hard money loans is that they tend to have higher interest rates than traditional bank loans – sometimes up to 18%. This can add quite a bit to your overall costs if you plan on holding onto the property for a longer period.
Private Money Lenders
Private money lenders are individuals or groups of individuals who lend money for real estate investment purposes. Private money lenders are often friends or family members of the investor, although they can also be strangers.
The main advantage of private money lenders is that they tend to be more flexible than traditional lending institutions when it comes to loan terms and conditions. Private lenders may also be more willing to work with you if you have bad credit or no credit history at all.
Another advantage of private money lenders is that they can provide funding on short notice – sometimes in as little as 48 hours. This can be beneficial if you need to close on a property quickly but haven’t been able to get approved for a traditional bank loan yet.
Of course, there are some disadvantages to working with private money lenders as well. One downside is that private lenders may not be as reliable as traditional lending institutions. If your lender happens to default on their end of the deal, you could be left in a difficult financial situation. Another disadvantage of private money lending is that it can be difficult to find a reputable and reliable lender in the first place – especially if you don’t have any personal recommendations from friends or family members.
Using credit cards to finance your fix should only really be considered as a last resort because it will likely cost you more in interest charges than any other type of financing method – sometimes up to 20% or more! However, if you have good credit and can qualify for a 0% interest rate introductory offer, then using credit cards could make sense in certain situations – especially if you need funding on short notice and don’t have time to apply for a bank loan or secure financing from another source. Just be sure that you have a solid plan in place to pay off your balance before the introductory period ends, otherwise, you could find yourself stuck with sky-high interest rates!
There are many different ways that you can finance your next fix & flip loan project. The most common form of financing is through a hard money lender, although other options include private money lenders, home equity lines of credit, and even credit cards. In this blog post, we went over the pros and cons of each type of financing so that you can make the best decision for your next fix & flip project!
Are You Looking For A Hard Money Lender You Can Trust?
Persevere Lending, located in Danville, California, was founded with unwavering ethics and integrity. Our mission is to represent all of our clients with the highest level of respect and accountability. We understand people's challenges and anxiety throughout their real estate financing process. We can help mitigate their stress and uncertainty by navigating them through the loan process concisely, professionally, and transparently.
Private real estate financing is designed for strategic and/or opportunistic capital requirements for borrowers unable to obtain traditional financing. Persevere Lending is dedicated to providing our borrower clients with creative, efficient, and effective loans. And providing our investor clients with superior underwriting and due diligence to assure consistent yields and capital preservation. Contact us today for your consultation!
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