The house flipping market reached an 11-year high in 2017. More than 207,000 properties were flipped that year, according to CNBC.
If you’re planning to invest in real estate, now is the best time to do it. In 2018, the average profit made per home flip was $65,000.
Whether you’re a real estate investor or someone trying to earn money on the side, look no further. This business model has been around for ages — and it’s proven to work.
Getting started is the hardest part, especially if you’re on a budget. Assess your loan options and select one that best suits your needs.
Let’s take a quick look at the most popular types of financing for flipping houses!
Apply for Home Equity Loans
Do you have at least 20 percent equity in your personal residence? In this case, you may qualify for a home equity loan.
With this option, you’ll receive access to a line of credit and only pay interest on what you spend.
In general, most lenders require a steady monthly income and good credit. If your application is approved, you can get up to 85 percent of your home value, minus the outstanding loan balance.
Consider Hard Money Loans
This type of asset-based financing is ideal for those trying to get into the investment property game.
Also known as a short-bridge loan, it gives you access to the money you need based on the value of the property used as collateral.
Compared to other financing options, hard money loans carry higher interest rates but are easier to obtain. Borrow pay around 7.7 percent in interest.
A major advantage of short-bridge loans is that they are accessible to those with less-than-stellar credit. The value of your property matters most. This type of financing is usually offered by companies and private lenders, not banks.
Resort to Cash-Out Refinancing
If you’re interested in fix and flip investments, consider cash-out refinancing. This financing option involves taking out a loan on properties already owned. Basically, it pays off your existing mortgage.
Investors who resort to this option refinance an existing home or another property to get the funds needed for purchasing a new property. How much money you’ll get depends on your property’s loan-to-value ratio.
Financing for Flipping Houses Made Easy
These are just a few of the many types of financing for flipping houses. Depending on individuals needs, you may also opt for 401(k) financing, business lines of credit, private lending, or transactional funding. Each option has its advantages and drawbacks.
A business line of credit, for example, works best for experienced real estate investors with a track record of success.
If you’re not close to retirement age, you may use your retirement savings to finance your venture. This option is quite risky, but if you have a plan in place, it might be worth it.
Don’t hesitate to consult a financial advisor, especially if you’re just getting started. A professional can help you understand your options and guide you on the right path.
In the meantime, take the time to learn more about the various lending solutions out there. This information will come in handy if you ever decide to start your business or expand your operations.