6 Options for Fix-and-Flip Financing
If you’re considering a fix-and-flip investment strategy, there are a number of exciting challenges to overcome. One of the most important decisions to make is the type of financing you’ll choose. Shop your options for financing on your investment property to discover how you can leverage your financials and receive the funding you need.
Permanent Loan and Online Mortgage
The first option is a permanent bank loan and online mortgage. This allows you to purchase an investment property or primary residence. However, they are best suited for properties that already have significant value, so you may need another option if you’re looking for a serious renovation on a distressed property.
A bridge loan makes an excellent opportunity to renovate and flip real estate. These loans are used to purchase a property or renovate it. A bridge loan is typically fast, easy to apply for and can be used to purchase your next investment while you are still flipping your first property. However, it’s not a long-term option. These loans typically carry high-interest rates, so be sure you have a plan to sell quickly in order to maximize this loan option.
Investment Property Line of Credit
Another popular short-term option is an investment property line of credit. This allows you to receive the quick funding you need. While the interest rates may be higher than a long-term mortgage, you can use it to renovate your property. A line of credit is also a flexible source of capital, so you can qualify for a certain amount before you’re ready to use it.
Home Equity Line of Credit
A home equity line of credit is only used for your primary residence, so it can’t be used if you’ve purchased a second property for a fix-and-flip. When you’re flipping your own home, you can use this flexible line of credit to make the necessary renovations you need to your home or simply use your home as backing for purchasing an investment property.
Another way to leverage your current home or property is a cash-out refinance. This additional loan is taken out in addition to your original mortgage but allows you to use your cash however you need to make improvements or invest in your real estate.
Hard Money Loan
Finally, use a hard money loan for the most flexible option. A hard money loan can be backed by your property or another asset. From running costs to covering your rehab budget, a hard money loan typically comes with higher interest rates and a shorter term but gives you the most convenience needed to flip your property.