Why Do You Need Quick Funding When Flipping Houses

Home prices in America have risen year-over-year for 24 consecutive months, according to Forbes. We have not seen this kind of steady, measured increase in prices in quite some time, and the market isn’t showing any sign of slowing down. Construction of new homes promises to take some pressure off the market, but we’ve been waiting for that new construction for the last three years or so. Who’s to say how much longer we’ll wait?

The rise in home prices is overall good news for house flippers, who stand to make great profits with lower than usual risks in this particularly strong housing market.

That said, the current seller’s market does present one significant obstacle for house flippers, especially novice ones – a much higher than usual barrier to entry.

After the Great Recession, underpriced homes were plentiful. Virtually anyone could find ideal investment properties and turn them over with minimal effort. But today, across the country only one of every 2,058 homes is in foreclosure, which is great news for the country at large, but for house flippers, it’s a different story.

Now more than ever, the importance of being able to pay cash -- and pay quickly – is deciding who wins out in investment property buying battles. Access to quick funding gives savvy house flippers leverage that let’s them be more decisive and more professional when making offers on rehab properties.

The Value of Funding

If you have deep pockets, well done you. Funding at your finger tips puts you at a major advantage. But house flippers who don’t have piles of gold stowed away can still compete in the current housing market with clever utilization of house flipping loans.

The number of house flippers who rely on third-party fix and flip funding has been on the rise for a number of reasons. Fix and flip loans:

• -allow flippers to invest in more expensive rehab properties
• -allow flippers to invest in more properties at a time
• -help reduce the amount of risk you take on during a flip
• -often include cash flow for renovations

Even flippers who have always funded their own flips in the past can benefit from house flipping loans by setting their sights on bigger projects, like apartment complexes, for example. In addition, with the capital freed up by a rehab loan, a clever investor could be empowered to better diversify their portfolio.

Of course, not all house flipping loans are equal. It’s vital that investors check all loan terms carefully and work with a private money lender with a solid, verifiable reputation. Avoid brokers who will make your loan more expensive by taking a cut for themselves, and look for lenders who are willing to adjust their terms based on your proven track-record as a house flipper. You should also be prepared to have skin in the game, usually at least 20% of the total purchase price.

Armed with a letter of preapproval and proven tactics for hunting down great rehab properties, the current market should hold nothing but possibility for you.