Need a Loan for House Flipping?

There’s a lot to consider when flipping a house. You need to find an ideal neighborhood that will attract buyers, you need to find that perfect house that is -- for whatever reason -- underpriced, and you need to find a great team to help you pull off an amazing flip in as little time as possible. But before you do all that, you need to find house flipping loans that will work for you.

Getting the right loan for house flipping can be a stressful ordeal. There’s quite a bit to consider, and it can be hard to tell which loans are best. Here’s a checklist of things that you should keep in mind when considering different house flipping loan options.

Rates

This is probably the one factor that no one overlooks. Obviously a lower rate is better, but rates alone aren’t enough to determine whether or not a house flipping loan is a good deal. For example, there might be hidden costs behind that rate that substantially affect your ROI. Remember that your level of experience should also have an impact upon your rates. If you have successfully completed a number of flips over the last year or two, don’t settle for a rates given to amateur house flippers.

Penalties

Keep an eye out for penalties that could cost you on the tail end of your investment. For example, some house flipping loans have a prepayment penalty built in. Always read the fine print and consider having a lawyer look at your loan terms before signing anything.

Loan Term

How long will you have to repay the loan? If something goes wrong or causes a delay with your flip, are you going to be in serious trouble with your lender? Make sure that your loan has a little bit of wiggle room for unforeseen delays.

Loan Points

One point on a loan equals a fee of 1% of the loan. If your rate is low but you have to pay a high number of loan points, you might not be getting as good of a deal as you thought. Again, pay attention to the fine print and understand what all of the terms mean before you agree to anything.

The Lender

Not all house flipping lenders are made equally. Some investors choose to get loans from hard money lenders. These loans tend to be a bit easier to come by, but the people offering them also tend to be less reputable. Private money lenders, on the other hand, can provide high levels of capital with fewer risks. Reputable firms that offer private money loan options are licensed and have strong connections within the house flipping world. Always ask to see a lender’s references and look them up with the Better Business Bureau before getting involved.

Joint Ventures

Rather than relying on a loan, you can also enter into a joint venture with another house flipper or a private money firm. As with any financial agreements, you should never rely on a handshake, even if the person you are working with is a close personal friend. Make sure to get all of the terms of your joint venture down in writing and clearly establish what the breakdown of responsibilities and the final distribution of revenue will be. Trust us: this will save you a lot of headaches and heartache down the line.