Which Loans Work for Flipping Houses

House flipping has reached its highest levels since 2007, owing to increasing prices of home properties and wider varieties of finance options to select from. There is also a shortage in housing supply which is allowing flippers to earn more profits now than what they were able to obtain after the 2008-9 housing crash.

Finance

Stepping into house flipping is not that simple. Technical knowledge and planning is imperative. It is even more important to know about the proper sources of finance. This finance should cover you in several ways.

What Needs To Be Covered

First, you need enough money to become the property owner. You will also need funds for renovation and enough money to pay up property taxes, utility dues and homeowner’s insurance. The insurance should be able to cover the renovation period and should extend up to the day the property is sold. You will also be subjected to short-term capital gains rate that may extend from 10 percent to 37 percent for any properties that you flip under one year. This will also depend on your place in the federal income tax bracket.

Hard Money Loans

Hard money loans are one way of getting finance for a flip. It’s not really known how this term came about. However, according to one source, these loans are called ‘hard’ as banks find financing such deals difficult. This indicates a major problem.

Bank Loans

Bank loans and similar financial products from conventional lenders can be notoriously difficult, if not impossible, to obtain for flipping. You will have to fill out an extensive application form which will take up plenty of time and energy. These traditional lenders will then heavily scrutinize your finances before approving you for the loan. If anything in your documentation raises questions in their minds, they will then ask for further documentation. You can expect this process to drag on from 45 to 90 days. This is completely unacceptable because you will lose your investment opportunity. Traditional loans defeat the purpose of financing fast moving investment opportunities.

There are even more problems along the way. Traditional lenders typically lend for houses that are in relatively decent shape. This is bad news for flipping because the most lucrative opportunities are for those properties that need extensive renovation. Lenders are interested in financing properties that are in great shape. Hence, your chances of securing the loan via this method are not terribly bright.

Another issue is that traditional lenders look at the current appraised value which will prove completely inadequate for your purposes. That’s because you have deliberately selected a house that is worth very little in its current state. You plan to upgrade and renovate it so that it is worth much more and then you will be able to sell it for a hefty profit. So you want a loan that covers both the current value AND the upgrade/renovation costs. Unfortunately, these lenders will only give you a loan that covers the current value, if they give you any loan at all in the first place.

Better Solution

Hard money real estate fix and flip is a much better solution. KLB Business Funding offers loans from $50,000 to $2,500,000 for acquisition, renovation, refinance and cash out. The interest rate is relatively low while the LTV is attractively high.

Contact KLB Business Funding today to get a free consultation.

3702 Pratt Avenue Bronx NY 10466

(347) 755-2257

info@klbbusinessfunding.com