House flipping is currently at its highest levels in 12 years and most home flippers will use financing to flip a house. This is partly due to the rising prices of homes, but also due to the growing availability of financing. Adding fuel to the fire is the limited housing supply which is helping flippers make more money than they got even after the housing crisis that ended the previous decade, which was when foreclosures where flooding the real estate market.
There’s no doubt that buying, fixing, and then quickly reselling a property can be a very lucrative endeavor, but it also takes far more money to go through this than if you were just buying a home to live in. You need enough money to be the new owner of the property, as well as renovation funds. You also have to cover homeowner’s insurance, utilities, and property taxes that have to be covered from the day you buy the home, all through rehab work, and up until the day comes that you sell it. On top of all this, contingent upon your current federal income tax bracket, you might have short-term capital gains tax rates from 10 up to 37 percent, which seriously eats into the profits of properties you flip in less than one year.
If you don’t have any cash of your own for investing or just not enough, then getting going in the world of house-flipping is going to mean using someone else’s money. The modern market is a far cry from the pre-recession days where anyone with a pulse could land a mortgage with no money down. Lenders simply see flipping as quite risky, So, how do you go about finding financing to flip a house?
Can you get financing to flip a house if you dont have any experience?
If you’re a new flipper without any or much experience, you might have a bit more difficulty in finding financing to flip a house, since a lot of lenders won’t work with anyone unless they’ve already successfully sold at least one home at profit. Some might work with new flippers, but you’ll get charged more interest and fees. That does not mean you should be discouraged if your turned down due to no experience. Neal Business Funding has programs for new flippers.
Hard Money Lenders
Hard money lenders are one place to look, as they might offer a fix-and-flip loan where they cover 90 percent of a purchase price and 100 percent of expected renovation costs. Interest rates might be as high as 15 percent for new flippers but gradually do down under 10 percent for those with multiple successful flips, as they are less risky.
Private lenders can be found both locally and online. If you have yet to look into this, you’re likely to be shocked at how many folks are available here, willing to lend their own saved up money in exchange for a good chunk of the profits. Networking with other flippers is crucial so you can know what private lenders are used to paying out or accepting as deal terms, so you can negotiate with confidence and numbers they will respect. Also keep in mind that what works with one private lender might not with another; they don’t follow industry standards in terms of minimum credit scores and the like. Just make sure you learn how to vet private lenders and then do so before you get into business with someone.
Crowdfunding is another option for finding financing to flip a house, thanks to the Internet. These are avenues where a number of institutions and individuals can collectively finance loans. Every lender is then known as an investor; they each supply a small portion of the loan to the borrower, and in return, they get interest on the money loaned out.
Don’t Get Discouraged
Finding financing to flip a house isn’t impossible, if you know where to look. Once you do the legwork and get some good networking done, you’ll likely find that you’ll have more trouble in finding good deals on homes than actually finding the money you need.
Neal Business Funding offers several options to finance your house flipping business. Call us now at 315-699-4703 or visit us at NEALFUNDING.COM