A Guide to Fix and Flip Loans

Would you like to try to fix and flip a home for the first time? If you play your cards right, you might be able to make some serious money by investing in real estate in this way.

When you fix and flip a home, you’re going to buy it and make certain home improvements to it to increase its value. Then, once you’re done with the home renovation process, you’re going to turn around and sell it for a nice profit.

Before you can do any of this, though, you’re going to need to get your hands on a fix and flip loan, which is also sometimes called a home improvement loan. This loan will provide you with the money that you’ll need to do each and every home upgrade that you’ll have to do to get top dollar for a house during a home flip.

Today, we’re going to walk you through the steps you’ll need to take to secure a fix and flip loan. Continue reading to see how it’s done.

Begin by Doing Your Research on the Real Estate Market in Your Area

Prior to even thinking about trying to fix and flip a home, you should do as much research as you can on the real estate market in your area. You’re not going to want to get involved in buying fixer-upper properties if they’re going for way more than they should be going for due to a housing shortage.

The real estate market has been red-hot in most parts of the country over the last year or so. It has made it challenging for those interested in fixing and flipping properties to find good options.

With this in mind, you might want to wait a little while before buying a fixer-upper and getting to work on it. You ideally want to buy one when the market is down so that you can get it for dirt-cheap and sell it at an increased profit later on.

Find a Home That You Would Like to Fix and Flip

Once you’ve done your research on the local real estate market and feel comfortable with the idea of buying a home, you should start to look around for a home that you think you can fix and flip. Most real estate experts will tell you that buying the worst house on a great street is a good approach to take.

If you buy a house that’s a little too nice and that doesn’t need much work, it’s going to be difficult for you to make a profit on it. At the same time, if you buy a rundown house in the wrong part of town, it’s also going to be tough for you to make a profit on it.

Your goal should be to find something in between these two extremes. You’re going to want to shop around for a house that needs a lot of work but that’s set up in an incredible location. It’ll give you the best chance to turn a hefty profit in the end.

Calculate How Much It’ll Cost to Fix and Flip a Home

After you find a house that you want to fix and flip, you might want to put an offer on it right away to secure it. But before you do this, you’re going to need to have some general idea of what it’ll cost you to renovate it.

You should contact a contractor that you trust and have them take a walk through the home with you. They’ll be able to talk with you about what you want to do to the house and give you an estimate as far as how much it’ll cost to fix it up.

This should help you figure out about how much money you can stand to make at the end of the fix and flip process. It’ll also help you decide if buying the house is going to be worth it in the first place.

Decide How You’re Going to Pay for a Home Prior to Fixing and Flipping It

How exactly are you going to pay for a fixer-upper house? Are you going to:

  • Use money that you already have stashed away in your bank account?
  • Borrow money from family members?
  • Try to obtain a fix and flip loan?

The third option is usually going to be the best one for most people interested in fixing and flipping a property. It’ll prevent you from having to put up any of your own money and help you avoid having to ask family members for a loan, which is almost never a good idea.

You will, of course, need to be able to qualify for a fix and flip loan to get your hands on it. But it’ll be worth exploring this option since it’s the best one that you have.

Look Around at the Different Lenders That Provide Fix and Flip Loans

When you want to apply for a traditional mortgage so that you can buy a primary home for yourself, you won’t have any shortage of options. There are so many mortgage companies out there that would be more than happy to extend a home loan to you.

But when you want to apply for a fix and flip loan, you aren’t necessarily going to have the same number of options. Many lenders consider fix and flip loans to be too risky, which is why they don’t always offer them.

As a result, you’re going to need to look specifically for a hard money lender to assist you. These types of lenders are often way more willing to work with those who want to secure a loan to fix and flip a house.

Make Sure You Have Good Enough Credit to Apply for Fix and Flip Loans

Because fix and flip loans are viewed as being risky, you’re probably not going to be able to qualify for one without having a little bit of experience in the fix and flip industry. You’ll also struggle to qualify for one if you don’t have good credit.

This means that you’re going to need to work hard to establish good credit before you even think about applying for fix and flip loans. You should try to increase your credit score as much as you can so that you look like a stronger candidate to all the hard money lenders out there.

Start the Process of Putting In Applications for Fix and Flip Loans

After you locate some hard money lenders that you might be interested in working with and fix up your credit as best you can, you can officially begin putting in applications for fix and flip loans. You should be able to apply for a few of them within a matter of just minutes online.

Once you’ve done this, you’ll start to see some responses come in. Some fix and flip lenders might turn down your application. But with a little luck, you’ll have at least a few that will agree to work with you. They’ll tell you about the terms that they can offer to you on a fix and flip loan.

Most fix and flip loans are only going to run for about a year. So it’ll be very important for you to find one with excellent terms attached to it. It’ll reduce the amount of money you need to pay to take out a fix and flip loan and put you in a good position to use a hard money loan to make a profit in the end.

Come Up With a Surefire Plan for Paying a Fix and Flip Loan Back

If you’re going to take out a fix and flip loan, you need to be 100% sure that you have a plan in place for paying it back. The last thing you want to do is default on one of these loans since it’ll end your fix and flip aspirations before they even get off the ground.

You should be ready to hit the ground running when it comes to renovating a home and putting it back up on the market. You should also have enough a plan in place for how long everything is going to take so that you’re able to repay a fix and flip loan ASAP.

Fix and Flip Loans Are an Excellent Way to Make Smart Real Estate Investments

Fixing up homes and flipping them for a profit can be risky if you don’t know what you’re doing. But as long as you go about doing it in the right way, it could potentially be very profitable for you.

It all starts with taking out the right fix and flip loan. It’ll get your fixer-upper project off to a strong start and improve your chances of turning a profit when everything is all said and done. Look into applying for one from the right lender today.

Get more tips on making wise real estate investments by browsing through the other articles found on our blog.