Florida Fix and Flip Lender

Purchasing rundown properties, fixing them up, and flipping them for profit is a great business model. However, this can often pose a problem for many flippers. How to get the financing required to purchase and flip the property? To do this, many people turn to an alternative business funding lender, such as the South Florida Funding Group. By turning to one of these lenders, you’ll be able to apply for fix and flip funding, this will make it easier to invest in residential properties. Let’s look at what these loans are, how they work, and whether they can benefit you.

What are Fix and Flip Loans

There are a few key differences between a fix and flip loan, also called a hard money loan, compared to a traditional home loan. First, they tend to have a much shorter term. In most cases, the terms will be less than one year. In addition, they tend to have high-interest rates, often between 12 to 18 percent. This is in addition to the points that will be charged. A point is one percent of the loan amount. Typically, properties will get between one to five points.

Another big difference is when the loan will be repaid. For traditional home loans, you will owe a certain amount each month. Alternatively, a fix and flip loan are only payable when the property is sold. However, if the home doesn’t sell on time, you will need to start paying the interest back.

Finally, the home will be valued based on the expected value that it will produce once it’s been renovated, known as the After Renovation Value (ARV). Typically, you will be able to get a percentage of the ARV loaned to you. For example, let’s assume that the home is valued at $100,000 after the renovation, but is currently valued at $40,000. You might be able to get a loan for 60 percent of the ARV, giving you $60,000. Once you’ve purchased the property, you’ll be left with $20,000 to repair and sell the property. To know the loan amount you’ll require, it’s essential that you understand the costs involved in flipping a home.

The Costs of Flipping Homes

When considering the size of the loan required to make a profit on the property, you’ll need to consider the costs involved with flipping the house. For example, you’ll first need to purchase the property. Then, you’ll have to fix it up. This can often mean paying for tradespeople and equipment. You’ll also need to make sure that you pay for the utilities. Another significant cost to consider is the taxes associated with the property. For example, you might be expected to pay property taxes and a capital gains tax. You should also make sure that the property is insured. These costs can quickly add up.

What You Can Do With a Fix and Flip Loan

A fix and flip loan has been designed specifically for people who are looking to renovate the property and sell it for a profit. To make sure that you are able to make a profit from the sale, you will need to make sure that you are able to manage your budget effectively. For this reason, it’s a common requirement of a fix and flip loan that you are have successfully renovated a property previously. If you don’t want to use the funds in this way, there are other potential funding options for you to consider.

Advantages of Fix and Flip Loans

There are several reasons why you want to get a fix and flip loan. First, these loans have been designed specifically to cater to the needs of property renovators. For example, they feature shorter terms, so you can quickly flip the property. Because of this, it will be easier for you to generate a profit when you use this type of loan. The lender is most interested in the overall project, and the future value of the property, rather than its current market value. This is also seen in the way that the loan will be repaid, waiting until after the property has been sold. When you will need to sell the property by, and what will happen if you don’t sell in time, are all set out in the contract. This will give you more security, ensuring that you understand your obligations.

Another big advantage is how quickly these loans can get approved. In some cases, you might be able to get approval within a few days. This will allow you to jump on opportunities as they appear. It will also allow you to cut out the red tape typically associated with sourcing investment for a project. Because of these factors, many renovators opt to use fix and flip loans for residential investment funding.

Bridge Loans for Fix and Flip Investors

In some cases, you might be on the verge of selling a property, and be looking for the next property that you want to buy. In this case, you might want to consider a bridge loan. This is designed to allow you to purchase a property without the need to sell your current renovation project first. This can allow you to move quickly on opportunities as they arrive. These also feature short-terms, typically between 12 to 18 months. However, the interest rates tend to be lower than fix and flip loans. In this loan type, there is a range of qualifiers that you will need to get this type of loan. For example, you will need to show that you can pay two mortgages at the same time. 

Renovating properties can be a great way of making money. However, many people struggle to get fix and flip funding for these projects. For this reason, you might want to consider getting either a fix and flip loan, or a bridge loan. To discuss these options further, and apply for a loan, make sure to get in contact with the friendly team at South Florida Funding Group: 786-544-2900 or click here to see if you Qualify.