Fix and flip loans are a type of short-term financing used by real estate investors to purchase and renovate properties with the goal of selling them quickly for a profit. These loans are specifically designed for investors who want to buy distressed properties, fix them up, and sell them at a higher price.
At Quintal Mortgage Co, we understand the unique needs of fix and flip investors. Our team of experienced professionals is dedicated to providing flexible and tailored financing solutions to help you maximize your investment potential.
With our fix and flip loans, you can access the capital you need to purchase properties, cover renovation costs, and fund other expenses associated with the project. We offer competitive interest rates and flexible repayment terms to ensure that our loans align with your investment strategy.
We offer fix and flip loans to Real Estate investors, you van borrow fund for the short-term, fix the property and then sell it for profit, call us to discuss your goals.
Program Highlights:
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- Fast funding to reduce Holding Cost
- No Prepay Penalty Available
- Value Based on ARV
- Experience Required
- 65% Max LTV/CLTV
What is a Fix and Flip Loan?
Fix and flip loans can help you have another income stream if you want to diversify your real estate investments. For example, rather than buying a home to hold and rent, you buy undervalued properties that you renovate yourself and sell it quickly.
The problem many investors run into, though, is capital. It takes money to buy a house, renovate and sell it and conventional lenders won’t finance a home unless it passes the appraisal. Unfortunately most fix-and-flip homes won’t pass the appraisal, leaving investors in a bind.
Fix and flip loans can help you get the money you need to add this opportunity to your real estate business.
A fix and flip loan is a short-term loan from a hard money lender. Investors can use the funds to buy the property, renovate it, and sell it. The loans are short-term and so is the exit strategy for most fix-and-flip properties.
How do a Fix and Flip Loan work?
Fix and flip loans use the property you’re buying as collateral. This is the same as conventional (traditional) financing, however instead of requiring full documention, the hard money lender will focus on the following:
- The property’s purchase price
- The work planned to renovate the property
- The cost of the work to renovate the property
- The property’s after-repaired value (ARV) as estimated by an appraiser
Lenders will do their own due diligence on the property such as original condition and location combined with the above information to determine your approved loan amount.
The terms fix and flip lenders offer vary by lender and are usually on a case-by-case basis. On average, you can borrow funds for 6 to 18 months. This being a short-term loan, make sure to have a solid exit plan to pay the loan off in time.
It’s also best to have an emergency plan if things don’t go as expected. For example, if the contractors find more problems with the home you need a Plan B to pay the loan on time.
Most fix and flip loans close within 7 to 10 days, giving you access to the funds quickly so you can get your process going.
How much can you borrow on a Fix and Flip Loan?
Most hard money loans, lenders need you to have equity in the home. When you purchase a home, you must put your own money into it. Most borrowers can borrow around 65% of the home’s after repaired value (ARV) for fix and flip properties.
Pros of a Fix and Flip Loan?
- Flexible Guidelines
- Unlike conventional financing, fix and flip loans have more relaxed guidelines. The focus is on the property, not you.
- Lenders may check your credit or ask about your income, but their focus is on what you plan for the property. How much will you pay for it? How much do renovations cost? What will the home be worth after renovations?
- Fast Returns
- Because fix and flip properties are short-term, you’ll see a faster return on your investment than with a buy-and-hold property. Since most terms are less than 18 months long, you should have a plan to buy and sell the property quickly. This allows you to move on to another investment, continuing to diversify your real estate portfolio.
- Fast Funding
- When you create a plan to fix and flip a property, time is of the essence. The values, bids, and contracts you’ve received are timely, so your funding must be too. Hard money lenders can fund loans quickly, giving you the funds needed within a week.
Cons of a Fix and Flip Loan?
- Higher Interest Rates
- Lenders base the interest rates they charge on the risk level of the loan. Since fix and flip loans are risky, borrowers usually pay higher rates. The good news is that the terms are short, so the total interest charges are not too excessive, but you must calculate them into your costs.
- Values can Decrease quickly
- No matter how much planning and research you do, real estate values are unpredictable. If there is a decline in the neighborhood or an influx of inventory, you may suddenly be facing limited buyers.
- Experience is required
How to get approved for a Fix and Flip Loan?
- PARTNER WITH A REPUTABLE LENDER
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- Work with an expert loan officer that knows these programs, understands the values and will help you get the financing that makes the most sense for the project. The right partner will have experience in fix and flips and may even offer advice regarding the professionals you need to handle the project.
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- If they require draws, how do they work? At what stages can you draw, and what must you provide to get the draws? Some lenders require proof of completion to obtain the next draw.
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- You need a plan that details what you’re renovating, who’s doing it, and the costs. Obtain several bids from different contractors and word of mouth referrals are very important.
Do your research and know the full cost to ensure you have enough money to invest with your own funds and qualify for adequate financing.
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- Fix and flips don’t always go as planned. Having an emergency fund of 10% – 15% of the project’s cost ensures that you can handle whatever is thrown your way and will be able to move forward with the project.
- PROVE YOU HAVE EXPERIENCE
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- Finally, prove to the lender that you have experience in real estate investing. Even if this is your first fix and flip, do you have experience with other investment properties? The more experience you have in the industry, the more likely you are to get the funding approved.
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