Fixing and flipping houses can be an excellent way to make a nice profit. The process is both unpredictable and expensive. The property must be purchased, renovated and all permits must be in place. If the property does not sell quickly there are holding costs and broker fees. The most difficult aspect is securing the necessary funding. The best candidates have a credit score of a minimum of 650, have already flipped one house, have no tax liens, foreclosures or bankruptcies. There are additional options to secure financing for those with less experience or imperfect credit such as hard money loans.

Private Loans

A private loan is generally issued for one year but can often be extended for an additional two to five years. This type of loan takes approximately one week to close. This is a good option for someone with poor credit or flipping their first home. Collateral is much more important than a high credit score. If the property requires a lot of repairs the financing may be at a higher percentage. Private loans are common for first-time flippers because banks will usually not finance loans for houses in poor condition. Private loans are also referred to as hard money loans. The majority of these lenders are found at real estate meetings, by word of mouth or online. Networking is critical for this type of loan since they are often based on trust and a personal relationship. These are high stakes lenders, they expect a portion of the funding to come from the investor and expect to see a return. This is the most common way to secure bad credit loans.

Bank Financing

A bank loan typically requires one to three months to close and is offered for a shorter period of time. Investors with approximately two years experience flipping homes and a good credit score can often obtain a bank loan. The investor must be able to make a down payment. The investor will usually receive a line of credit instead of a lump sum. The interest rate is lower and they only pay interest on the amount they use. It is important to compare the rates offered by numerous banks. The investor must report their income, employment history, asset and income statements and all necessary documentation to the bank for a faster approval. For those unable to qualify for bank loan please review bad credit loans.

Online Mortgage Lenders

Online mortgage lenders issue loans for fifteen to thirty years for investment properties. This loan requires roughly thirty days to close. This type of loan is designed to make flipping homes easier but some experience is generally required. This is a traditional mortgage and the application process is automated. Numerous traditional lenders offer this service. The rate is lower than with most other loan types but the repayment takes longer.

Home Equity Loan

This is a loan for five to fifteen years with an average closing time of two or three weeks. This loan is granted to individuals with equity in their homes willing to make payments on a second mortgage. This provides the funding to flip a house. The investors home is the collateral. If a profit is not made on the investment the individual can lose their home. This option is not recommended for any investor who has never flipped a home before. Rental properties can also be used as collateral for a home equity loan. These are longer-term loans with lower rates. A line of credit is usually easier to make payments on than a shorter term loan.

Friends and Family

The last resort to secure funds to flip a home is the family and friends of the investor. These individuals should understand both the risks and the industry of real estate. If the investment is not profitable the relationships may be damaged permanently. The agreement should always be in writing and the terms extremely clear. The investors must understand exactly what the investor is planning to do and accept the risks involved. The interest rate is decided by the investor and their family and friends.

Prior to looking for a loan to flip a house, it is important the proper research is conducted. The investor must become familiar with the real estate market in the area. This included reliable local contractors and specific neighbourhood details. Any lender will want to see more than simply good credit. They expect to be presented with a solid plan. For any investor ready to flip a home the above sources are a good place to begin. Funding will be acquired more easily through the lenders online. The more traditional lender will charge a higher rate.