Advice PLEASE- Hard money vs conventional to finance fix & flips?

7 Replies

     We, my brother & I are just starting out in this exciting world of real estate investing. One of the things that gets me excited are all the options and possibilities. So many paths can be taken and one not necessarily better then another.  

We currently are analyzing numerous flip and buy and hold options daily. We both have exceptional credit and have the means of funding a portion of the total project cost to show "skin in the game".

The question we have is on financing options. 

We have a goal of owning 10 rental properties financed with convention loans. However, we plan on flipping several house as well. Obviously conventional financing is the "cheapest" but, I am concern that strategically it is not the best option. 

THE QUESTION/s: Would we be sabotaging funding of the rental investments with conventional loans if we also used conventional loans for short term financing; such as for fix & flips? How will it effect our credit if we used conventional financing for fix & flips? Should we be using hard money knowing that we plan on using conventional for the buy & holds?

As stated, we are newbies and new to this site. So please checkout my profile to learn a bit more about me/us...

Thanks for taking the time to read this post and look forward to gaining knowledge through your experiences, Dustin

  

                 

It is generally not recommended  to use conventional financing for short term fix and flip financing. Conventional lenders are not in the business of making short term loans and if you have an established history of paying off your conventional loans in a very short time it could prevent you from further acquisitions. DM me for further info and details.

@Dustin Burke

Most investors do not use conventional loans for flipping properties. Most distressed properties will have too many condition issues to get past the inspection and the appraisal.

Most flips are done with either cash, hard money or private money.

Money on a flip is made by buying at a deep discount due to the condition issues. Money can be made on properties that only need moderate cosmetic work, but those properties are hard to acquire at a discount.

@Richard A. This is what I was afraid of. I obviously need to find and sit down with a lender/s and hash out some options. I will DM you will some further questions. Thanks for the reply. 

Originally posted by @Dustin Burke :

@Richard A. This is what I was afraid of. I obviously need to find and sit down with a lender/s and hash out some options. I will DM you will some further questions. Thanks for the reply. 

 No problem! 

Commercial divisions of local credit unions should have some options for short term lending and would be cheaper than hard money. Downside is they probably won’t close as quickly as you might want.

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