Many people who are interested in fix and flip real estate investing find the most challenging part of flipping houses is money.  Houses aren’t cheap.  

Don’t worry, we have outlined several solutions for your funding problems below.

Whether you flip houses for a living or have it as a lucrative side hustle, every house-flipper needs the funding to purchase the home as well as the capital to renovate and flip it. There are lots of different methods that experienced house-flippers take when seeking funding for flipping their next house. There are five frequently-used methods that house-flipping experts use to get funding:

– Finding an investment partner.

– Taking out a hard money loan.

– Reaching out to private lenders.

– Going to traditional banks.

– Using their own money and assets.

Each of these methods has unique benefits and drawbacks. The one you choose is dependent upon a number of factors, which include what you are qualified and able to do as well as what your budget and finances make you capable of accomplishing.

Find a Fix-and-Flip Investor

House-flipping partnerships can be structured in many different ways. So, they can cater to the wants and needs of both parties. 

The goal for you as the fix-and-flip specialist is to find a partner who has at least part of the capital you need to make the purchase and rehab the home. Do your math so you will know exactly how much you need and what your profit margin is going to be before you make the deal.

The ideal fix-and-flip partnership has role players who can accomplish everything you need to make for a successful flip and sale. Everyone involved must bring something valuable and unique to the table, which makes the partnership work for all involved parties. For instance, if you are leading the charge on fixing and flipping the house, your investment partner is in charge of supplying the capital, whereas you are responsible for managing the project. Sweat equity goes a long way as well.

If you are planning on partnering with a fix-and-flip investor, you should expect to split the profits with your partner to guarantee that you and your partner will split the profits in a way that is fair and reasonable for his or her capital investment as well as the work that you put into the fix-and-flip. The most common split between the fix-and-flip expert and the investor is an even 50/50.

That being said, Brass Financial does offer to “partner” with you on Fix and Flip investments if the right set of criteria are met.  If you are looking for a partner, give us a call and let’s see if that is an option for your next fix and flip project.

Advantages of Being a Fix-and-Flip Investor

Here are the best advantages of being a fix-and-flip investor:

– May require little or no investment of your own money.

– You do not need a credit score or good financial health to find a partner.

– You have a collaborator to share information and opinions with.

– Your partner can give you access to another network of skilled professionals to pool from.

– It allows you to access funding and split profits by sharing responsibility and workload.

Disadvantages of Being a Fix-and-Flip Investor

All good ideas come with some liabilities. Here are the disadvantages of being a fix-and-flip investor:

– It can be one of the most expensive ways to split the profits for the flipper.

– Conflicts can arise between the flipper and the investment partner.

– There can be room for personality conflicts between partners.

– Investment partners can act in ways that are unethical, dishonest or do not fulfill the role.

Get a Hard Money Loan For Your Fix-and-Flip

A hard money loan is an asset-based loan. So, getting this type of loan is not dependent on your credit score. Instead, the house you are planning to flip is used as collateral to fund the loan.

If you want a hard money loan, the lender will take the value of the home into consideration and then decide if you can borrow to make the purchase and rehabilitate the property. The lender will also place a lien on the home, to secure the money and minimize the risk. The interest rates on hard money loans may be a little higher than your traditional home loans but they close fast and are often funded when traditional loans are often difficult to get approved for rehab projects. Hard money loans for fix-and-flip projects can range from 10-15 percent but Brass Financial offers them starting at 6.99%. This figure can depend on the level of risk the lender associates with the deal.  

Another benefit of hard money loans is that you normally have a six to twelve month interest-only payment due.  This keeps your costs down while you complete the renovations and resell the property.  Many fix and flip investors find hard money loans to be their best option.  This is especially true for first-time fix and flippers.

If you are thinking about taking a hard money loan, do your homework. It is critical for investors to fully understand the contract for the loan they are signing on to. You also need to get a sense of the money lender to make sure that they are reputable.

Brass Financial is a great source for these types of loans.  With over 30 years in the business and an outstanding reputation, our fix and flip loan programs have some of the best terms in the industry.

Pros of a Hard Money Loan For Your Fix and Flip

Some of the advantages of getting a hard money loan for your fix-and-flip include:

– You don’t need a good credit score to get funding.

– The loan application process is quicker than traditional home loans.

– The financing is for short-term loans, so you will not get stuck with long term financing.

– Most hard money loan lenders are comfortable with working with fix and flip real estate investments.

Disadvantages of a Hard Money Loan For Your Fix and Flip

Some of the  disadvantages of getting a hard money loan for your fix-and-flip include:

– Higher interest rates on loans (as compared to a traditional mortgage).

– Some hard money lenders have unreasonably short repayment terms (6 months) … be careful this can put you in a bind if the project experiences delays for any reason.  You can avoid this with Brass Financials 12-month interest-only terms.

– Avoid hard money lenders with bad reputations.  Sadly, they are out there.  Choose Brass!

– These types of loans are less regulated than more traditional forms of loans and financing. They require a lot of attentiveness when reading over the contract for the loan.  This is true no matter what type of loan you take out.  Again, we don’t play those games at Brass.  We’ll educate you about all the aspects of the agreement and make sure it is the right fit for you.

Get a Private Lender who Will Help You Fix and Flip Real Estate

Private lenders are another great option for you if you are looking to fix and flip houses. The benefits that separate private lenders from other forms of financing is that they have fewer hoops that you have to jump through to get funding for your flipping business. These loans can also be processed much faster than other forms of lending or financing. Large institutions like banks have a lot of regulations they have to follow to make a loan happen. It can take a lot of time and cause a lot of red tape for you and others who are trying to fix and flip real estate. The upside of finding private lenders is that they can loan money however they want to. They are not bound by the same rules and regulations that financial institutions and banks have to follow when granting loans.

Another benefit of getting a loan from a private lender is that interest rates may be lower when compared to hard money loans.

However, the strengths of choosing a private lender for fixing and flipping houses also has its weaknesses. Since there are not any regulations or standards when it comes to private lenders giving loans for house flipping, you and your lender need to be in full agreement about the details of the loan, including:

– The interest rate.

– The payment schedule.

– The consequences of defaulting on the loan.

– The consequences should the house not sell for a profit.

Another major downside to trying to find private lenders to fund your fix-and-flip business is that a good private lender can be difficult to find, which can lead to a long research and networking process.  Fortunately, Brass Financial Group has spent the past 30 years developing a network of reliable private lenders.  We take the work out of it!

Pros of Using Private Lenders for Fixing and Flipping Real Estate

Here is an overview of the advantages of using a private lender to fund your fix-and-flip venture :

– A (potentially) inexpensive way to finance and flip houses.

– Much shorter lead time from finding the loan to obtaining the funds than a traditional mortgage.  However Brass Fix and Flip loans close very quickly, so this may not be true in your situation.

–  Offers more flexibility for loan terms and payment schedules.

– Private lenders are more likely and flexible to accept varying sources of collateral in order to provide your loan. They don’t necessarily need a great credit score or good personal financial standing to guarantee a loan.  Again, this is true in a general sense, but our Fix and Flip loan program eliminates this concern as well.

Disadvantages to Private Lenders for Fixing and Flipping Real Estate

Here is an overview of the disadvantages of using a private lender to fund your fix-and-flip venture:

– Private lenders are hard to find. They can take a lot of time, networking and research to find credible ones.

– There is little or no regulation in the private lending sphere. Trust is one of the major factors in negotiating and agreeing on these loans.

– It can be a massive personal liability if a deal were to go bad.  

Do yourself a HUGE favor … talk to us BEFORE you choose any alternative method of financing your fix and flip investment.  We can help you to avoid all sorts of problems!

Traditional Bank Fix-and-Flip Loans

Of all of the options that fix-and-flip real estate specialists have for seeking loans to flip houses, the traditional route is the hardest. At the end of the day, banks and large financial institutions just really do not have great loan products that are specifically tailored for house flippers. These institutions are also not set up in a way that allows them to properly evaluate a house flip, nor do they have the credibility of a fix-and-flip expert. They are limited to relying on the credit scores and personal assets of the flipper to assess the details of the loan.

However, banks and other lending institutions can offer some of the lowest rates and best terms when compared to the other options for financing house flipping.

If you want to fix and flip real estate, the best chance you have of obtaining a loan through a major lending institution is to take out a business loan. Banks are used to offering 30-year mortgages, which take a lot of prerequisites and requirements. All of which, at the end of the process, will not be worth it for house flippers.

If you do decide to take the route of going to a bank for a business loan to flip a house, you need a well-developed business plan which you can present that bank. It should lay out the details of how you will use the loan and the projected figures and facts that support you making a profit off of fixing and flipping the home. If you have a long  business history flipping houses, include that information with the proposal you submit to the bank. Those who do not have any history flipping will likely have trouble getting banks to loan them money.

Pros of Traditional Bank Loans

Here are the biggest pros of getting a traditional bank loan to fund your fix-and-flip:

– Great terms.

– Dealing with a lender who is trusted, regulated and has a reputation.  This is why we take our 30 year history and great reputation so seriously … because we know how important this is!

–  Low-interest rates on bank loans.

– Easy to find.

Disadvantages of Traditional Bank Loans

Here are the biggest disadvantages of getting a traditional bank loan to fund your fix-and-flip:

– It is hard to get loans from banks for fixing and flipping homes.

– The bank will use your assets and credit score to judge your reliability.

– Banks do not have a wide or great selection of loan options for house flippers.

– Slow process to obtain loans.

– Lots of red tape to weed through to get a loan.

Fix and Flip Real Estate Using Your own Money and Assets

Some flippers use their own assets to finance fixing and flipping real estate. The upside of using your own money is that you get to keep 100 percent of the profits of your fix-and-flip sales. The downside is that you assume 100 percent of the liability of anything that goes wrong in the process.

If you do use your own assets to finance fixing and flipping a home, there are a few primary sources that you can pull from to finance their next project.

Cash provides the most versatility for fixing and flipping a home. Many house flippers can also pull from their IRAs, though this should be a last resort. IRAs are reserved for retirement. Also, if you do decide to pull money from your IRA, you may have to face serious penalties and fees to get to that money.

You can also take out a home equity loan to finance your next fix-and-flip project. If you already have equity in your home or you already own your own home, you can get a line of credit to help finance your next fix-and-flip project.

You can also use credit cards to help fund a rehabilitation of a house you want to flip. But, using credit cards to make large purchases can be risky. The interest rates on your credit cards can quickly eat into the profits that you could be making on your sale.

Advantages of Using Your Own Money

Here is a list of pros of using your own money to fund your fix-and-flip:

– Quick and easy access.

– If you use your own cash, you won’t owe any interest.

– You can potentially keep all of the profits from your sale.

Disadvantages of Using Your Own Money

Here is a list of disadvantages of using your own money to fund your fix-and-flip:

– Maximum risk and 100 percent of the liability.

– Can be a massive, long term setback if you lose money on your flip.

At Brass Financial, we have been working with fix and flip investors for over 30 years.  We offer versatile loan options for your fix and flip business that are specifically designed for you. Brass Financial can get you the right rates and the right terms from reliable lenders so you can get you funded quickly.  

Contact us to learn more about business loans and fix and flip loans from a reputable lender who understands your situation.

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