Learn To Be A Fix and Flip Investor: THE DIFFERENCES IN LOANS TO FLIP HOUSES

Monday, December 10, 2018

THE DIFFERENCES IN LOANS TO FLIP HOUSES

It’s getting a reputation as the quickest way to become a millionaire—flipping houses. The first step is making sure you get financed.

It is possible, and not that uncommon, to flip houses with no money down. These loans are referred to as Arizona FIX AND FLIP LOANs. There are a few different methods when financing a house flip.

The more houses you flip at a time, the more money you make—common sense, right? But, who has the cash reserve to do one deal at a time let alone multiple deals. This type of stress can limit your deals. Every borrower searches for the lowest interest rate. But, time is what a house flipper should be focused on. Conventional lenders tend to shy away from house flipping and that makes perfect sense. You already have a primary residency and then you ask for a second mortgage—the bank knows you won’t be living in two places at one time. If you have to default on a loan, it’s definitely going to be the house you are flipping before your home. This is where a borrower needs to learn about different loans to flip houses.

WHAT LOANS ARE AVAILABLE TO FLIP HOUSES?

Home Equity Line of Credit— This is not overly common when it comes to house flippers and isn’t recommended as the first strategy you take—but, it is a possibility and one to investigate. The interest rate will attract borrowers. The downside— they are highly risky and if you don’t follow the strict guidelines and requirements you could find yourself in a heap of trouble.

Retirement Account/401K— This is a possibility because it is money you already have. So, why not just use it? For starters these accounts are taxed heavily for early withdraw and you will accrue several punitive fees. Also, that is your future and do you really want to bet your future on a house? This is best suited for experienced house flippers. If you choose to go this route make sure you have the help of a financial professional.

Arizona Hard Money Loans—These loans work for first time flippers and veteran flippers alike. They are short-term loans—typically, between six months and three years. However, because these are financed through private money lenders they don’t have to follow the Fannie Mae Freddie Mac guidelines. They have much more flexibility when it comes to loan terms. As with all loans—there are pros and cons. The con with a hard money loan is the interest. They vary from 7%-15%. And, although that may seem a little steep—keep in mind that these loans are interest only payments until the end of the loan. At the end of the loan the payment is due in full. Since the point of flipping a house is to get the rehab done as soon as possible and sell the property these loans work out for both the borrower and lender. Another benefit to Arizona Hard Money Loans is most lenders do not impose early payment penalties.

Looking at multiple possibilities, when it comes to funding for your project,

should be your goal. Not every loan is beneficial for every borrower.

However, for a newbie house flipper that doesn’t have high cash reserves looking into hard money funding is definitely your best bet. Find a local lender that is experienced in flipping houses, ask questions and make sure you ask about extra fees and any possible penalties.

Dennis Dahlber Broker Ri CEO Level 4 Funding LLC Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.