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Fix and Flip Loan

If you’re ready to buy a property that you plan to renovate for a profit, consider a fix and flip loan.

Fix and flip loans provide short-term financing to help cover both the purchase of a property as well as the cost to renovate and repair it. They allow real estate investors to quickly jump into projects with flexible financing options so that they can complete a project and make a profit.

What is a Fix and Flip Loan?

There are a handful of options to finance investment property. Loan types often differ based on their qualification requirements and the terms they offer. The best loan for you will depend on your individual needs. 

With a fix and flip loan you can qualify for a short-term mortgage meant to help finance the purchase, repair, and renovation of a property, all within one simple loan.

It works well for real estate investors who need to move quickly to purchase a property that they can then flip to sell or rent within an appropriate timeline for a profit. These short-term loans make it possible to afford renovations. When a project is completed, the loan can be paid back or refinanced into another loan type meant for a longer term.

Fix and flip loans also allow for more flexible qualification requirements because they don’t have to meet the documentation requirements that the Consumer Financial Protection Bureau sets for standard loans. Fix and flip loans rely on the profit potential of the investment property, rather than your personal income.

How to Get a Fix and Flip Loan

If you’d like to see whether you qualify for a fix and flip loan, connect with us. To get you started, we’ve outlined the steps and qualifications needed to help you understand the process.

The Financing Process

By sharing basic information about the property as well as your plans for flipping it and repaying financing, we’ll work with you to see if a fix and flip loan meets your needs and whether the project qualifies.

As we move through the process we’ll discuss the terms your property qualifies for and your financing options, as well as request the necessary documentation.

We’re with you through each step, leading to a simple and efficient closing so that you can move forward with your investment.

Fix and Flip Loan Requirements to Meet

These are some of the common requirements often needed to qualify for a fix and flip loan. If you have questions about these requirements, we’re here to help.

  • We’ll need to know what the expected leverage is for the property. In many cases, the Loan-to-Value ratio needs to be above 70-75%.
  • We don’t need income information but do need bank statements and credit score information for the borrower.
  • To understand the stability of the investment, it’s helpful to have details of your plan to renovate the property and repay a potential loan.
  • An appraisal of the property will need to be done to assess its potential value.
  • It may also be helpful to provide any relevant past experience you have with managing real estate fix and flip projects.

Fix and Flip Loan FAQs

Financing a property and its renovations is an important step in reaching your investment goals. It’s normal to have questions. We’ve compiled answers to the frequently asked ones, but don’t hesitate to ask more.

What types of situations are fix and flip loans meant for?

Fix and flip loans are available for a range of scenarios and various property types, including single-family, multi-family, and mixed-use properties.

Whether you want to purchase and renovate a property to sell for a profit or to rent out to earn rental income, you may be able to finance both the purchase and the renovation of the property with a fix and flip loan. Renovations vary, including additions, repairs, rebuilding, etc.

If your situation qualifies, a fix and flip loan allows you to move quickly to purchase a property and begin the project so that you will begin profiting from the project, which also helps you pay back your financing.

How does a fix and flip loan differ from standard investment property loans?

Fix and flip loans provide financing for a specific investment purpose. They cover the costs of purchasing a property and renovating or repairing it to ultimately profit from the improved value of the property. For this reason they’re offered with shorter term lengths, meant to cover the timeline of your project.

They meet unique financing needs to help you cover the costs of not only buying property but also the resources to renovate it to improve its value. With flexible qualification requirements based on the after-repair value of the property, fix and flip loans are more accessible than standard loans. Standard loans require certain income and other documentation related to the borrower’s personal finances rather than focusing on the property itself.

Do I need good credit to qualify for a fix and flip loan?

Although your personal income isn’t considered for financing, you will need to share your credit score to get approved for a fix and flip loan. The minimum requirements vary depending on the situation and can be more flexible than standard banks allow. In many cases a credit score of 680 or higher is often best.

How is the value of a fix and flip property determined?

Investors and lenders often use the 70% rule to decide the highest acceptable price to pay for a property while still making a profit. This helps you and the lender understand how the after-repair value applies to the overall property value and your potential loan amount.

To use the 70% rule, first estimate the after-repair value of the property based on local sales figures of similar properties in the area. Multiply that figure by 0.7, or 70%. Now subtract the cost of estimated repairs, somewhere between $15-60 per square foot. With this new value, you have the maximum buying price you can pay for a property to still make a profit.

What costs are required to close a fix and flip loan?

There are closing costs associated with processing any loan, and the costs of a fix and flip loan are comparable to standard mortgages. They include costs for the lender to service the loan, as well as an appraisal and other fees.

You’ll also need to make a down payment that will be paid at closing. The down payment amount will depend on the specific details of your project and your equity.
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