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WHAT ARE FIX AND FLIP LOANS
Both individuals and institutions have the option of flipping property. These fix and flip loans act as a bridge between the buyer’s money and the price at which the product is being purchased and the renovation costs included. Mostly, these loans are short term and are usually repaid using proceeds of the sale.
These short term loans are popular among real estate investors and they use them to purchase as well as improve properties then sell them at a profit. The improvements being done could vary from small renovations to reconstructing a house. These fix and flip loans are mostly used for residential renovations. For fix and flip projects the sale is normally done through auctioning. After purchasing this property, the buyer can
decide to just sell the property or they could decide to do renovations on the property, adding value to the property.
WHAT YOU CAN DO WITH FIX AND FLIP LOANS
If you decide to take a fix and flip loan, you could use the money to either purchase property from a seller at a discounted price. Then take the property renovate it, add tiles to the floor, repaint the walls, add cabinets to add on the storage and then sell the house at a profit.
The borrower for this fix and flip loans has the chance to buy an old house that is being sold at an affordable price. Then take this newly bought house do some renovations like replace the floor tiles with more appealing and modern ones, install new cabinets in the kitchen to provide enough storage facilities, repainting the house to more appealing and warm colours and furnishing the house with modern appliances. This changes the look and the market value of the house.
The person taking this fix and flip loans could take this loan and use it to purchase vacant land somewhere that has a family house on it, demolish the property and build a new and better house adding maybe bedrooms and storage units. Also adding internet to the house could enable you to resale at a profit.
BENEFITS OF FIX AND FLIP LOANS
Your investment is secured. Real estate will act as collateral in case the land or property is involved in the offering. If there is a case of default the lenders of the fix and flip loans might take responsibility for you thus the risk incurred is shared between you and the lenders.
The duration of these loans are short and easy to work with. Fix and flip loans happen over like 12 to 24 months and there is no kind of penalty that is paid for early payments of the loan.
They have a very low stock market correlation and this is the reason they are the best for diversifying traditional portfolios.
TYPES OF FIX AND FLIP LOANS
HARD MONEY LOANS.
This is a short time financing option. This could be from a few months to a few years and the good thing real estate here acts as collateral. Qualifications for getting hard money loans are lower but the interest rates are high. An advantage is if you are looking to quickly fund a project and you don’t meet the qualifications this could be a good option.
These fix and flip loans act as bridge loans that are used to facilitate the selling of a property. This is usually the choice of many buyers who are seeking to buy and then fix and flip the property. These are short term loans.
WHAT FIX AND FLIP LOANS LENDERS USUALLY LOOK FOR
For the lenders to approve the fix and flip finances, you have to assure them that you have the capability of repaying the loans. For you to increase your chances of getting your fix and flip loan approved, make sure to make a detailed business plan that shows the estimated cost of construction you are planning to do. Add your credit history in the business plan for the lender to see you have a consistent income. Make sure you do your research and know how much of the fix and flip loan the lender is willing to finance.