Realtor and Investor · North Hollywood, CA · Member since 2015 · 49 posts · 25 votes
Soooooo
I'm wonder what you folks feel is the best option for flipping.... What do you use. Let's say you have capital for down payment for both and good credit scenario
A. Conventional loan with no prepayment penalty and Heloc
B. Hard money lender
El Paso, TX · Member since 2016 · 20 posts · 7 votes
10y
My answer is depends on how fast you need the funds. I had funds for a hard money lender in a week, where my conventional loan wanted pictures of the property, reserves in the bank for inspection issues, appraisal....we went with the hard money lender not to lose out on the deal and offered some rehab money. However, we much rather a lower interest and no prepayment penalties but sometimes who has time for that! Depends on your timeline. If you can use your HELOC to pay the entire amount in Cash, I would much rather do that.
El Paso, TX · Member since 2016 · 20 posts · 7 votes
10y
My answer is depends on how fast you need the funds. I had funds for a hard money lender in a week, where my conventional loan wanted pictures of the property, reserves in the bank for inspection issues, appraisal....we went with the hard money lender not to lose out on the deal and offered some rehab money. However, we much rather a lower interest and no prepayment penalties but sometimes who has time for that! Depends on your timeline. If you can use your HELOC to pay the entire amount in Cash, I would much rather do that.
Lender · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
10y
If you are flipping properties and you are suing hard money at sway 10.5% Interest Only..and you filp the property in 90-120 days, you are far bettwe off, than attempting to get conventional financing, which normally will take 45 days + to source.
Flipper/Rehabber · Pittsburgh, PA · Member since 2014 · 144 posts · 21 votes
10y
Hi @Nicole C.,
The best option for you definitely depends on your needs. Are you in contract and needing to close quickly? Or are you just planning ahead and will have time to close a conventional/ conforming loan?
Lender · Jersey City, NJ · Member since 2016 · 68 posts · 24 votes
10y
Hey Nicole!
Option A is slows you down, but has way lower interest rates than a hard money loan. As such it also has much more stringent underwriting standards than a hard money loan. Harder to qualify for. Takes almost a month to close. Has seasoning requirements.
Option B is less stringent in its underwriting guidelines, requires a higher down payment, higher interest rate but moves much faster. including the time it takes to do the BPO to assess the value of the property. But, most of our hard money loans close in less than a week and include 100% of your rehab costs.
If you are planning only to rehab and flip to properties, then HML is the fastest way to go. Buy and rehab, then sell as soon as humanly possible and repay the loan. Anything left over is your profit! If you are planning to buy and hold. Rentals. Then you can use a HML to purchase the property then quickly refinance into a traditional mortgage. The goal is to get a payment that is less than your rental income on said property, that way the mortgage pretty much pays itself.
Let me know if there is anything I can help you with!