Four Ways To Get Financing To Flip a House
Flipping houses can be a very profitable business. The hard part is coming up with the money you need to fix and flip your first house. You need to purchase the house, pay for materials and possibly labor for fixing it up, and pay the taxes and insurance on the house while you are working on it. Here are some ways you can get the financing you need to perform your first house flip.
1. Home Equity Loan
If you own your home, you may be able to get a home equity loan or line of credit. Normally, a lender will agree to loan up to 85% of the value of the home, minus the amount you still owe on your mortgage. If you have paid down your mortgage enough, a home equity loan or line of credit may be a great way to finance your fixer-upper.
2. Loan From Family or Friends
If you can convince someone in your group of friends or family members to help you out with a loan, it can be a win for both of you. Your friend or family member will get the chance to invest in real estate and earn some interest, while you will be able to get financing from someone who knows you and trusts that you will pay them back. Make sure to formalize the loan in writing so that there is no question later about the terms of the loan.
3. Partner Financing
You may be able to find a partner who wants to invest in the home with you. Your partner may want to help with finding a property and doing the renovations, or he or she may want to remain hands-off and just provide the money. Depending on the partner’s involvement, you can decide on the percentage of the profit that you will give him or her. Put everything in writing before you start out.
4. Hard Money Loan
Hard money lenders are private individuals or companies, not banks. They will lend to people who do not qualify for a bank loan. The interest rates they charge are higher than a bank, and their terms are usually shorter. If you can’t get a loan anywhere else, it can be worth it to pay the higher interest, and since you are flipping a house, you will not need a very long-term loan.
These are just some of the options for finding financing for fix and flip deals. One of these loans may be just what you need to get started with house flipping.