Thomas Murphy - Pine Shores Real Estate



Posted by Thomas Murphy on 4/11/2021

Image by Kevin Schneider from Pixabay

Some people just have an entrepreneurial spirit and a willingness to roll up their sleeves and get things done. But more than a few people feel restrained from maximizing their business potential because they don’t seem to have enough cash on hand.

The good news is that you don’t necessarily need deep pockets to venture into the house-flipping industry. An increased number of lenders recognize that house flippers can be a secure investment, under the right circumstances. Qualifying for a loan requires some due diligence and proof you can pay it back.

How To Get A House Flipping Loan

Traditional mortgage lenders are highly unlikely to float you a loan for this endeavor. If you think about it logically, a 15- or 30-year note doesn’t fit a relatively quick fix-and-flip scenario.

House flipping outfits typically work with hard money lenders. These resources generally approve loans with the idea that they will be paid off in a short period. In many ways, the business model employed by money lenders mirrors that of house flippers. You both want to invest, recoup your cash and enjoy a tidy profit. There are other sources to consider, such as:

  • Crowdfunding: Internet-based platforms provide opportunities to request funding from a pool of investors. These people all contribute a small portion, which minimizes their risk. The interest rates can be exceedingly high in some cases.
  • HELOC: House flippers can borrow against the equity in their home to invest in a house flipping project. A Home Equity Line of Credit does not necessarily set parameters on how the money is used.
  • Private Firms: Some companies lend money through non-traditional channels as a type of business transaction. They may charge higher interest than some banks. The added expense can be factored into the resale expenses.

To qualify for traditional loans, you need to meet certain requirements. These typically include reasonably good credit scores, assets and a sizeable down payment that demonstrates you have a large investment and interest in the project.

How Does A House Flipping Loan Work

One of the reasons that hard money lenders and others remain open to business speculation projects stems from the fact a tangible real estate asset will be in play. You can anticipate that part of the deal will seat the lender as the first lien holder. Should the real estate market dip or offers don’t cover your expenses, the lender can recover its loan at the closing. In essence, the property serves as a security deposit. Fix-and-flip loans are typically determined in one of the two following ways.

  • Loan-to-Cost: The borrower receives a percentage of the total cost. The other portion comes out of the house flipper's pocket. Fix-and-flip lenders allow broad flexibility about how you get startup money, unlike traditional banks.
  • Loan-to-Value: In this scenario, the loan generally equals a percentage of the total anticipated market value after renovations.

One of the promising aspects of securing a loan from these sources is that you do not necessarily need previous experience. A sound business plan, good credit score, down payment and an independent property valuation can persuade a loan officer you are worth the risk of an 18- to 36-month note.




Tags: loans   Flipping   House-Flipping  
Categories: Uncategorized  


Posted by Thomas Murphy on 2/21/2021

Photo by Skitterphoto from Pexels

House flipping has been made particularly trendy in recent years, in part due to the popularity of shows like Flip or Flop and Property Brothers. If the trend has caught your eye as well, here’s an overview of the steps you’ll need to take to get the job done right.

1. Know Your Market

Start looking for a home in your area that’s ripe for flipping. This is where the phrase location, location, location applies. A run-down or out-of-style home in a nice neighborhood is what you’re after. 

To find this, however, you’ll want to work with a real estate agent who has their finger on the pulse of your community. They’ll be able to help you find a home that fits your desired description.

2. Start Small

For your first house flip, invest in a home that has a solid foundation and roof, needs little to no construction or remodeling and basically only requires some style updates and TLC. Avoid homes that have mechanical or structural problems as these can be costly with littler return. 

Later on, down the line, you may be interested in investing in a more ambitious fixer-upper. For now, stick with something manageable. 

3. Create a Plan Based on Your Budget

Set a budget for the house flip. Naturally, you’ll first need to factor in the actual purchase price, realtor fees, insurance and loan payments. After that, you can decide how much “flipping money” you’ll have to work with. 

This will help you decide what improvement projects will be possible and which you’ll have to pass on. If the home would look much better with an open floor plan in the family room but it also needs a new roof, you might have to forego the floor plan remodel as a new roof is more essential. 

Be sure to get a plan in writing before you begin work. You can always change things later on, but you’ll want a blueprint to start with.

4. Network With Contractors and Start Work

Interview contractors in your area to settle on who will do the brunt of the work in the home. If you plan on flipping many houses in the future, it’s a good idea to build a network of consistent contractors you can rely on. 

5. Stage the Home for Sale

Lastly, before putting your finished home on the market, invest in rental staging furniture and decor. Styling the home before you have it shown will help inspire potential buyers as to what each interior space could look like.

Flipping a home can be a wonderful experience for anyone with an ambitious attitude and enterprising spirit. Use these steps as a template to make your house flip a success.




Categories: Uncategorized