Due to their potential for a significant return on investment in a relatively short time frame, fix and flips have become increasingly popular in the real estate world. But there can be a financial barrier to getting started, regardless of whether you’re a first-time flipper or a seasoned professional.
Luckily, the fix and flip loan from private hard money lenders was designed for this purpose, to alleviate the financial burden on the investor. Investors can leverage this financing option to fund their renovation projects with less personal capital and without being tied to the rigid processes and requirements of conventional lenders.
If you’re looking to increase your profits through expanding your real estate investment portfolio with fix and flip houses, learn more about fix and flip loans, how they work, and how to get one.
What is a fix and flip loan?
A fix and flip loan is a type of short-term financing that assists investors in buying and renovating a real estate property with the intention of reselling it for a higher price, thus making a profit on the sale.
Fix and flip loans are used to:
- Purchase a distressed or undervalued residential real estate property placed at an auction, through a foreclosure or a bank short sale,
- Finance property renovations, improvements and upgrades,
- Cover other property-related expenses (e.g., listing and selling the property), and
- Gain profit through the sale of the property within a short time period.
Generally, our loan term lasts anywhere from 12 months to 18 months, since most property flips are completed within this timeframe.
How does a fix and flip loan work?
Fix and flip loans are secured by collateral, usually, the real estate property that is being purchased and renovated. This means that investors can borrow against the real estate investment property’s equity. In case of a default, the lender could take ownership of the property.
To calculate the amount of funding for the loan, private lenders use the loan-to-value ratio or LTV (the loan size against the appraised property value). For private hard money loans from HCS Equity, the LTV is a maximum of 65% of the property’s present appraised value (the actual property value in its current condition). However, borrowers can cross-collateralize multiple properties that have substantial equity and provide above 100% LTV.
Since there is no prepayment penalty on the rehab loan offered by HCS Equity, borrowers have more financial flexibility. They can complete the project promptly and settle the loan whenever they have the necessary funds, usually once they sell the real estate property.
How to Get a Fix and Flip Loan from HCS Equity
Although fix and flips can be really profitable, the initial real estate investment as well as home improvement expenses, can place a financial burden on the investor. Investors will need access to sufficient funds to finance the property they wish to purchase and renovate. This is where fix and flip loans from HCS Equity, a trustworthy and accredited private hard money lender, may come in handy.
We understand the importance of time in fix and flips and ensure that funds are paid out promptly after approval. Fix and flip loan applications are usually approved in as little as 4 to 6 business days, while the amount that is typically borrowed ranges from $30,000 to $3,000,000 per transaction.
The typical loan duration is 12 months, however, we can provide additional time depending on the extent of the renovation and any obstacles that may arise.
Since conventional lenders such as banks usually do not finance this type of loan, it generally has higher interest rates. However, we offer competitive rates and interest-only payments to ensure that your flix and flip journey is smoother and less financially stressful.
The Final Words: Work with HCS Equity on Your Fix and Flip
Fix and flip loans can be a great financing option for real estate flippers who wish to purchase a distressed or undervalued property and make necessary improvements and upgrades in order to sell the property for returns on investment. However, the success of this journey depends on the availability of timely and flexible financing, which is exactly what HCS Equity offers.
Delays can sometimes lead to potential lost opportunities, therefore, we provide timely access to funds that allows investors to make prompt offers on potential properties.
Contact HCS Equity, a private hard money lender with many years in the industry, and secure a fix and flip loan tailored to your unique needs.