House flipping has always been a fascinating option for homeowners, but it’s become a more popular trend in the past several years, thanks in part to fix-and-flip shows like HGTV’s Fixer Upper. Whether you’re new to the fix-and-flip gig or you’ve already successfully fixed and flipped a couple of houses, here are three things you should know about financing a fix and flip home.
Experience Goes a Long Way
Fix and flip loans are a great way to fund the cost of renovating a home you plan to turn around and sell. But fix and flip financing is particularly a good option for those who have prior experience in this field because they present less of a risk to the lender.
If your fix and flip business is still relatively young, you might consider consulting other businesses who are more seasoned, so that you can get a lay of the land. It can be helpful to gather resources and learn the trade inside and out before you jump into it entirely on your own. You could even invest in a property with someone who has more experience so that they can teach you the dos and don’ts of fixing and flipping as you go. With that being said, young flippers can still obtain fix and flip financing! If you’re just getting your feet wet in fix and flip financing, know that there are options for you!
At the end of the day, flipping homes is risky, but it can really pay off if you know what you’re doing! The more prepared and knowledgeable you are, the better your chances are of securing fix and flip financing.
Fix and Flip, Short and Sweet
Another thing you should know about fix and flip financing is that it’s quick. When you’re fixing a house with the intention of flipping it for profit, the faster you can flip it the better! Consequently, fix and flip loans are typically short, 12 to 14-month loans. So you need to keep this in mind when you’re considering taking on a property. Ask yourself, “Can I flip this house quickly enough to be able to pay off the loan, or do I need to keep looking?”
Know What You Need Before You Ask
When you’re trying to secure fix and flip financing, you’re not just asking the lender for the property’s purchase price. There are multiple expenses you need to anticipate going into a fix and flip project. So factor these other costs into your ask. Costs could include realtor fees, HOA fees, renovation costs, staging, closing costs, etc. Be sure you carefully add up and consider all of the expenses you’re going to have before you ask for a fix and flip loan. The goal is to have plenty of funds to cover the project, instead of getting halfway through and running out of capital.