DD: 3 Must Haves Before Getting Your First Fix & Flip Loan
Daily Dose!
3 Must Haves:
1) You Still Need Cash
You won't be able to finance 100% of the purchase price and renovation costs in the vast majority of circumstances. To make the arrangement appealing to your lender, you'll almost certainly need a large sum of money. This holds true whether you're applying for a standard loan or a loan from a hard-money lender.
2) It's Not Always Easy
If you have less-than-perfect credit and are new to the fix-and-flip business, you'll almost certainly hit some hurdles. These types of investments are considered dangerous by traditional mortgage lenders, banks, and credit unions, who shun them. This type of loan also takes a long time to complete, which could result in you losing the opportunity and having to start over.
3) There is a Risk Involved
Investing in real estate is a dangerous business, even if you perform rigorous market research. There is no certainty that your property will sell, especially if you are selling it quickly. You should expect to lose money on a fix and flip deal, just as you would on any other investment. You can reduce some of the risks by getting guidance from other successful business people.
What other must-haves do you have in mind?
Do lenders ever look at experience level when lending to fix and flips or do they just look at the deal along with the financials the investors brings?
The hard money lenders I work with all want to know your experience & it's typical to answer how many houses have you sold in the last 3 years. I have a "resume" sheet with our recent projects & basic Fin info
For Fix and Flips:
1) Experience. Some banks will not work with a newbie. We do, but the terms will not be ideal on your first one. High Interest Rate. Low Leverage on the purchase. Things get better on #2 and then better on #3 and then once you've completed 3 then the fix and flip product becomes very investor friendly: 90% toward purchase. 100% rehab. Low interest rate.
2) Get your docs in a row. You will need a bunch of docs: bank statements, entity docs, HOI policy, etc. If you move quick you put pressure on the bank to move quick. If you stall then they can just say well we never got the docs and let your file sit.
3) Stay engaged with your loan officer. Email him/her daily with questions or an update. If you need help getting things together then they should be eager to help you, if they don't have time for you then they are not a good loan officer.
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Lender
- 267-251-7649
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