Financing on a flip?

[LeAnna Davis]

Ok, so I have analyzed a house but am wondering how to calculate the financing costs while I flip the house.  What are the financing costs for a flip and what does that even mean??  Somebody help me?

[Caleb Jordan]

Originally posted by @LeAnna Davis:

Ok, so I have analyzed a house but am wondering how to calculate the financing costs while I flip the house.  What are the financing costs for a flip and what does that even mean??  Somebody help me?

Financing costs for a flip will vary depending on the type of loan you are getting.

There are several loan options, but many people use a hard money lender because they will lend money to purchase and repair a house, don't need to look at income, and can get you money quickly etc.

Here are some common costs for a hard money loan flip loan.

Orgination fees also called points - this is a percentage of the loan charged as a one time fee. If you have 3 points on a 100,000 loan that is 3% which equals $3,000 

Interest - every month you will have to pay interest on the loan. For a typical flip loan this will easily be 8 to 13%  you want to have an idea how many months the flip will take because you will be paying interest the whole time.

Fees - you will probably have to pay a  one time processing fee. $1,000 plus is common

probably an appraisal that will be around $500

Draw- the funds for repairs are usually disbursed (often  called a draw) as  the work is completed there is often a fee involved with each draw, could easily $100 to $200.

These are the basic costs, but not an exhaustive list

If you will be financing a flip and you are not well versed in these terms and procedures you probably should hold off on flipping until you fully understand these.