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Real Estate Investor Financing

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How does a fix and flip loan work?

A fix and flip loan is a short-term loan used by real estate investors to purchase and renovate a property before selling it for a profit. This type of loan can be a great way to quickly turn around a property, but it is important to understand how they work before getting started. In this article, we will take a closer look at how fix and flip loans work and what you need to know before taking out one yourself.

What is a fix and flip loan?

Fix and flip loans are usually short-term loans with terms that range from six months to two years. The loans are typically interest-only loans, which means that the borrower only pays the interest on the loan each month and does not have to make any principal payments.

The main advantage of a fix and flip loan is that it allows the investor to purchase a property without having to come up with all of the cash upfront. This can be especially helpful when the investor does not have a lot of capital on hand.

Another advantage of a fix and flip loan is that it can be used to finance both the purchase of the property and the costs of renovations. This can help to keep costs down and make the project more affordable.

The main downside of a fix and flip loan is that it is a high-risk investment. If the property does not sell for a profit, the investor may end up owing more money than they originally borrowed.

What are the qualifications for a fix and flip loan?

To qualify for a fix and flip loan, you will need to have minimum FICO score of 625+, and ideally, some experience flipping properties. You’ll also need to make sure that you have a state-registered business with a valid EIN from the IRS. Lenders will also want to see a detailed rehab budget for your property with basic information about the contractor who will be in charge of the work. Once you’ve been approved for the loan, you will typically have six months to a year to complete the renovations and sell the property.

If you’re thinking of taking out a fix and flip loan, you’ll find that the team at MyBusinessCredit.com offers the best rates and terms.

Here are a few features you get with a Real Estate Investment Loan through My Business Credit:

  • $75k – $2.2M in available financing.
  • 12-18 month term, interest only.
  • 9 payments are rolled into the loan.
  • Interest rates start at just 7%.
  • 100% financing on rehab
  • We can work with or without a rehab budget.
  • Funding in as little as 72 hours

What are the benefits of a fix and flip loan?

There are many benefits of a fix and flip loan, but the three main benefits are:

1. You can use the loan to purchase a residential property that needs repairs or renovation. This can be a great way to get started in real estate investing, as you can buy a property at a lower price and then add value by fixing it up.

2. You can use the loan to finance the repairs or renovations that you need to do on the property. This can save you a lot of money, as you won’t have to come out of pocket for the repairs.

3. You can get a loan with a relatively low interest rate. This is important, as it will save you money on the overall cost of the loan.

What are the drawbacks of a fix and flip loan?

There are some potential drawbacks to taking out a fix and flip loan. First, if the property doesn’t sell as quickly as you had planned, you may be left with a large mortgage payment and no way to make it. Second, if the repairs on the property end up being more expensive than you had anticipated, you may find yourself in financial trouble. Finally, if the housing market crashes after you’ve taken out a fix and flip loan, you could end up owing more on the loan than the house is actually worth.

How to get a fix and flip loan

If you’re thinking about taking on a fix and flip project, you’ll likely need to take out a loan. But how does a fix and flip loan work?

First, you’ll need to contact one of our Private Money Lenders, and fill out a formal application. Be sure to include all the necessary information, such as the purchase price of the property, the estimated repair costs, and your expected profit margin, and any other documents requested by the lender.

Once your application is approved, you’ll get the loan amount in lump sum. This money can be used for any purpose related to your fix and flip project, including purchasing the property, paying for repairs, and marketing the property once it’s finished.

The repayment terms for a fix and flip loan will vary depending on the lender, but most loans are interest-only loans with a balloon payment at the end. 

Conclusion

A fix and flip loan is a type of loan that allows you to purchase a property, make repairs or renovations, and then sell it for a profit. This can be an excellent way to make money in the real estate market, but it is important to understand how these loans work before you get started. With a little research and planning, you can use a fix and flip loan to your advantage and make some serious profits.

Contact the team at My Business Credit to get started today.

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