We recently posted a Beginner’s Guide to House Flipping. In that post, we highlighted the importance of preparing your own cash, budgeting, and learning the ins and outs of the local real estate market before getting into fixing and flipping homes.
Even with your own cash at hand, however, a point will come where you will need to apply for a fix and flip loan.
There are a number of different lending products which can be appropriate for fixing and flipping real estate.
Regardless of the specific type of loan you choose, there are certain features that are important anytime you are going to fix and flip. Following are some to look for when you are considering your options.
1. Simple, rapid loan process for fast closing.
The more streamlined the lending process is, the better. If you are going to fix and flip, you need to be able to move fast when you identify an opportunity to get in ahead of your competitors.
If you go to a traditional bank, it could take you over a month to get through the loan process. But if you work with a local mortgage company that specializes in fix and flip loans and other flexible products for real estate investors, you can close much faster than that.
2. Alternatives to full documentation.
The traditional full documentation loan process is not only slow, but also may not be suitable for you as a real estate investor.
Consider applying for a loan which allows you to document your income through bank statements as an alternative. This is a faster and easier process, and if you are working with the company that is used to connecting investors with loans, there shouldn’t be any hassles.
3. Rehab value considerations.
When it comes to establishing loan-to-value (LTV), it may be to your benefit if you are dealing with a lender that is willing to account for the rehab value, not just the current value of the property you wish to purchase.
4. Flexibility regarding property condition.
With some types of mortgages, it is impossible to gain approval if a property is not already in a pristine, livable condition.
The chances are good that the property you want to fix and flip is nowhere near that, which means that you will not be approved for those types of loans.
So, you will need to apply for a loan which offers you some leeway when it comes to the condition of the property.
You might even be able to apply for a loan which includes financing for repairs as well bundled in with financing to purchase the property itself.
If at all possible, see if you can get a loan which will only include interest for the funds you actually use, not interest charged for any extra funds for repairs which end up going unused.
5. No prepayment penalty.
When you fix and flip, your goal is to not only buy a property swiftly, but to repair and upgrade it and sell it rapidly as well.
As such, you are looking for short-term financing in most cases. If there is a prepayment penalty attached to a loan, that is going to end up costing you thousands of dollars unnecessarily. So look for a loan which does not include a prepayment penalty.
We Can Help You Apply Rapidly for a Flexible Fix and Flip Loan
If you are ready to fix and flip real estate in Los Angeles, we have extensive experience connecting investors with suitable loans. We would love to help you finance your project affordably so you can maximize return on investment.
Ready to begin? Please give us a call today at (818) 601-2231 to schedule your consultation. We look forward to helping you achieve your real estate goals in LA or the surrounding area.