The 4 benefits of Fix and Flip loans

Buying real estate, repairing it and selling it quickly is usually a profitable recipe. However, a key component of this recipe for success is access to capital. If you don’t have enough funds but are interested in rehabbing a property, a hard-earned lender that offers fix-and-trade loans could be an excellent financing option. These loans are structured in such a way that they allow a buyer to quickly acquire the property and have access to a reserve of funds for construction and renovation costs.

Buying real estate, repairing it and selling it quickly is usually a profitable recipe.

Advantages of Fix and Flip loans

There are many advantages to fix and switch loans and the demand for this source of finance is constantly increasing in the real estate investment industry.

Four key benefits include:

• Fast approval: Getting approved for a fixed and reversible loan is a much faster process compared to the traditional banking system. If the borrower has submitted the required documents, a private lender can approve the loan in a couple of days, while a traditional financial institution can take at least a month. In addition to the significantly longer wait time for bank loan approvals, the borrower will need to submit numerous documents and meet multiple conditions as part of the process.
• Any property: Properties in different states of condition may qualify for a fix-up loan. Whether the property is bank-owned, short-sale, foreclosed, or dilapidated, a borrower is likely to find a hard-earned lender willing to finance the deal. Again, a borrower may not have the option to finance these types of real estate opportunities with a bank. Banks are very risk averse and have strict rules about what type of property they can accept as part of their loan portfolio.
• Zero Prepayment Penalties: If you take out a loan from an established bank, you may be subject to penalties if you have the opportunity to repay the loan before the due date. This is called a prepayment penalty. Most fix and flip lenders will not subject you to this fee.
• Covered Repairs – When you buy a property with the intention of remodeling it, a significant portion of your budget will be spent on construction and renovation costs. A fix-and-switch lender will generally set up a loan reserve that will cover the costs of repairing the property in addition to interest. This can take a lot of stress and pressure off builders and developers as they don’t have to worry about spending money out of pocket on repairs or payments.

Teaming up with a solid lender who understands your property, the local real estate market, and is willing to help you through the entire buying, building, and selling process is vital. When choosing a hard money lender, keep the following in mind:

• The lender must have enough experience in the industry. A private lender with deep roots in the real estate investment market will not only be able to offer you a better deal, but will also have numerous contacts to help you along the way, from recommended settlement companies to permit issuers and other preferred providers. . This can turn out to be a great asset as speed, quality and efficiency are the name of the game in the fix and flip world. The less time you need to research companies and contractors, the more money you have in your pocket.
• Check the history of lenders to make sure they are genuine and have a good track record. It may be worth taking a closer look at lenders who tempt borrowers with “trial rates” or a “documentless” underwriting process. As with most things in life, if it seems too good to be true, it usually is.
• Lastly, you should check what past or current customers have to say. Is the lender responsive and knowledgeable? How many loans do they have on the street? Do they have good ratings on Google or BBB? Just as the lender performs due diligence on their borrowers, borrowers must, in turn, perform due diligence on the hard money lender. It is a partnership and both parties must be strong and committed to the process to ensure success.