How To Find the Right Financing When Flipping a House
Flipping a house can be an exciting project, and a smart financial decision. However, it may not always feel like a simple and straightforward process. This can be particularly true when it comes to figuring out not only how to finance your house flip, but also how to finance it the right way. The good news is, though, that there are options when it comes to financing your house flip project.
Types of Loans for House Flipping
When you’re looking to fix and flip a house, there can be many things to take into consideration before you get started, and finding the funds to do it is one of them. Unless you already have a chunk of money set aside for your fix and flip project, chances are you will need to seek a loan. One commonly used type of loan for house flipping is a hard money loan. This kind of loan is a short term loan, and unlike a traditional loan is offered by an individual or a group of investors, rather than a financial institution. Some of the main things that differentiate a hard money loan from a traditional loan are that they are typically expected to be paid back in a shorter timeframe, like 6 months to 1 year, rather than multiple years.
Also, the interest rates tend to be higher than your average traditional loan as well. Another popular type of financing for a fix and flip is a home equity line of credit or loan. For those that have built up equity in their primary residence, this can be a viable option for getting the funds you need to do your project. With a home equity loan, you will get the full amount upfront and then be expected to pay it back in regular installments, with interest, similar to a traditional loan. If you are an experienced house flipper, an investment line of credit can be another good option, because it is a kind of loan intended solely for real estate investments. With this kind of loan, you are often provided with a relatively short time period to pay it back, typically from 18 to 24 months.
The Bottom Line
Flipping a house can be a fun project and a good financial decision in the long run. However, the process may not always feel simple. This can be particularly true when it comes to financing. However, the good news is that you have options when it comes to finding the right kind of financing for you.
