House flipping involves purchasing homes for less than what they’re worth, fixing them up, and then selling the house at above cost. This can be an extremely lucrative business if done right but comes with high risks for beginners who might lack enough capital and expertise to invest in this type of an opportunity. If you are intending to buy a property to fix and flip but don’t have enough cash, you will need a loan. Here are some ways you can get a loan for house flipping.
Get A Property Under Contract
There are several ways to structure your purchase contract, including buying the property in the name of your company, adding an addendum, or purchasing the property in your name with “and or assigns.” It is recommended that you engage a trusted attorney to perform a title search. This process involves examining public records and determining who the rightful and legal owner of a property is.
Do your Diligence
Other important information to evaluate includes deeds, probate cases, property plats, judgments, construction liens, federal and state tax liens, and county land records. Your title search report should be ready before you close purchase on the property. If you are working with a lender like InstaLend, we shall work with a title agent to ensure there is clear title on the property before you close purchase.
Oftentimes, investors purchase distressed properties to fix them up and sell them for a profit. Therefore, you need to estimate the potential costs of repair projects and compile a list of subcontractors and other relevant references. One way to determine if the property is worth your time is to multiply the After Repair Value (ARV) by 70 percent. Subtract any repair costs you might have from that number. This is called the 70 Percent Rule[SS1] in real estate.
When you gather your latest personal financial statements and proof that past fix and flip projects were profitable, ensure that you are not facing any foreclosures, bankruptcies, or other liens from real estate projects.
Consult with a Listing Agent to Confirm the Property’s Status
Real estate is a competitive industry and there are times when the number of investors is high, but the supply of properties is low. Speak to a local listing agent to check on the availability of the property. This way, you can determine how fast you need access to funding for securing the property.
Get Your Fix and Flip Loan Pre-Approved
It is recommended that you request a pre-approval prior to locating a property. This method allows you to secure the funds needed to close on an ideal property for a flip. A pre-approval form may ask for your contact details, FICO score, property address, purchase price, your experience in real estate, bankruptcy and foreclosure status and borrowing entity name. When you get pre-approved, you will know how much you can qualify to borrower against a property. It is in your best interest to get this done quickly so that you have more time to resolve any approval issues that arise.
Find a Reliable Lender who Specializes in Fix and Flip Loans
A fix and flip loan is specifically designed for those who want to use a specific property for investment. These come with shorter terms compared with home loans who are more suited for people who plan to stay on the property for a long time. Fix and flip loans at InstaLend range from 12 to 18 months and are ideal for those who want to renovate and resell fast. If you are keen to find out more about Fix and Flip Loan from InstaLend, contact us today.