Everything You Need To Know About Flip And Fix Loans
In today’s day and age, more people than ever are taking quite an interest in flip and fix loans, because actually there’s a lot of money that can be made in flipping houses if one manages to do it successfully. There are surely some financial barriers before getting started but once you are able to pass such barriers you will surely be able to enjoy a lot of success through this type of loan.
What exactly are fix and flip loans?
They are real estate fix and flip loans that are issued for the short-term and they are designed in such a way that can help investors in purchasing and renovating properties in order to further sell them at a profit, generally in the time span of 12-18 months. This loan is actually issued by private investors and individuals and they are usually in the form of hard money loans. These loans are mainly used for the purpose of purchasing residential properties during auctions. During foreclosure, these loans are used for the purpose of upgrades as well as financing renovations. The flip and fix loans have also been used in the past to cover any and all expenses that might be associated with the ownership of the property in question.
What do flip and fix loans fare against traditional home loans?
Both loans are quite different and they are on the other side of the spectrum. They both might be real estate loans but that is perhaps the only similarity to them. In almost every other sense, both of these loans are quite different. The flip and fix loans are designed for the purpose of renovating and reselling properties in a short period of time. On the other hand, traditional home loans are actually much more long-term investments that have been specifically designed to help the person taking the loans, successfully purchase a property that can easily serve him for several decades.
The duration of flip and fix loans is in the range of 6-18 months and on the other hand, the duration of traditional home loans is the range of 15-30 years. The difference is stark and it extends to the interest rates of both of these types of loans. While for flip and fix loans you might to have pay interest rates of 12-18%, for traditional home loans, you might have to pay interest rates in the range of 2-4%. For such loans, the collateral is actually the property in question around which the whole loan revolves. On the other hand, the collateral in traditional home loans is the property and personal credit of the borrower in question.
Here’s how you can secure fix and flip loans for yourself
One lender of loans might differ very starkly in his or her functioning to another flip loan. Securing such types of loans might actually not be so easy and might have to face some challenges in the process of securing flip and fix loans. But here are a couple of things you can do to enhance your chances of securing the loan.
- Try securing such loans from a local lender
- Try securing these loans from a reliable lender with a good portfolio
- Explore the option of construction draws because they are an excellent option of drawing funds from the approved loan amount for covering all the different construction works that need to be done on the property
- Estimate the cost and after that schedule the project.