Hard Money Rehab Loans – House Flipping Loans – Investment Property Rehab Loans
Fix and flip loans (or hard money rehab loans, investment property rehab loans, house flipping loans) are a type short-term financing that allow real estate investors access to the necessary capital to acquire, improve and resell a house for profit. These loans are available from hard money lenders but can not be obtained from traditional lenders, like banks.
When the lender is reviewing an application for this type of loan, they may consider the following about who is borrowing:
•Experience (in the real estate market as well as in house flipping)
•Credit and amount of available capital
- Price of the investment property
•Estimated value of the property after repairs
- Estimated cost of renovation
The loans are either based on the current value of the house in question or on the after repair value (or ARV for short). Fix and flip lenders tend to loan on the current value of the property because there’s less risk in case issues with the rehab of the property arrive, the estimated end value of the home after repairs was incorrect/misjudged or the real estate market begins to decline while the property is being fixed up.
Like all types of financing, these loans come with an interest rate. Interest rates on fix and flip loans are typically in the range of 8-16%. In addition to interest, you will also have to pay around 1-5% of the sale price of the home to your lender at after closing. The longer it takes to the sell the home, the higher the fee you have to pay will be.
When you consider the additional fee along with the interest rate, this loan isn’t exactly the cheapest option. However, you can and definitely should factor this cost into the way you go about the house flipping project. Bidding less for the home you’re purchasing or increasing the listing price when it’s time to sell to balance out the cost of financing are just a few options that should considered. Also, remember that you’re not paying the interest for long, since a home can typically be flipped in less than a year.
If you’re interested in exploring your financing options for flipping and fixing homes, you can check out the loan programs we offer here. For more information about hard money and fix and flips loans contact us at (888) 631-8215 or complete our snapshot to start GMA Hard Money’s loan application process.