RED SEA FUNDING

Fix and Flips

Fix and Flips

There is good money to be made in flipping houses, if you do it well, but there can be a financial barrier to getting started. Conventional mortgages were designed for long-term residences, which makes them ill-suited to investment property loans. As more investors entered the market to flip old properties, a new loan model was needed. The fix and flip loan was designed to fill that gap.

What Are Fix And Flip Loans?

Fix and flip loans are short-term, real estate loans designed to help an investor purchase and renovate a property in order to sell it at a profit—generally within 12 to 18 months. Some investors use more conventional loans and lines of credit to finance their projects, but most fix and flip loans are hard money loans from individuals or private investors.

 

Fix and flip loans are most often used to purchase residential properties at auction or foreclosure, to finance renovations and upgrades, and to cover other expenses associated with the ownership of the property.

Advantages Of A Fix And Flip Loan:

It’s hard to overstate the advantages of a hard money fix and flip loan for investment properties.


  1. Fast funding — Investors bidding on foreclosures or auctioned properties need to have cash-on-hand quickly. Traditional home loans can take a month to process and deliver, but hard money fix and flip loans can provide funds within the week.
  2. Flexible terms — Hard money fix and flip loans from private investors are not tied to the same rigid structures, processes, and requirements as traditional banking institutions. Borrowers who don’t qualify for traditional loans can often still work with a hard money lender.
  3. Less risk — A traditional home loan is backed by your personal credit and property, but a hard money loan is backed only by the property for which it was granted. If the worst does happen, you won’t lose your home.


It’s no surprise that hard money fix and flip loans are powering so much of the real estate renovation industry, but there are also advantages to investors as well:


  1. Diversified portfolios — Especially in seasons when the real estate marketing is doing well, fix and flip loans are a great way for investors to diversify their portfolios.
  2. Security — Real estate is a secure investment in general. In the case of a fix and flip loan, the property is the security. If the borrower should default, the lender can possess the property and potentially work with another flipper to get it back on the market.
  3. Short terms — Most property flips are completed in 12 to 18 months, which means lenders can see the return on their investments relatively quickly.

When a visionary lender and a talented flipper come together, hard money fix and flip loans become the vehicle to everyone’s success.