Funding Your Fix and Flip – The 20% Down Payment

One of the most common inquiries we receive at Alliance Commercial Finance from new real estate investors looking to get started in fix and flip investing is how to come up with the funds necessary for the down payment. Some investors seek out 100% financing, but lenders who will provide 100% of the funding for a fix and flip investment are few and far between if there are any at all.

Many private lenders and hard money lenders will loan up to 80% of the Loan to Value towards the acquisition of a fix and flip property. Some lenders, including Alliance Commercial Finance will also lend 100% of the rehab costs for a fix and flip or rental rehab property.

However, the challenge many new investors face is coming up with the initial down payment and working capital required to make their first purchase. Even experienced real estate investors will often face a bottle neck and capacity issue after investing in a few properties and realizing that all or most of their cash and liquid capital is locked up in investment properties.

More and more real estate investors are now utilizing unsecured business lines of credit to come up with the 20% down payments and other soft costs in acquiring investment properties. Few real estate investors realize that they are able to build business credit for one or more of their companies (whether an LLC or corporation) and obtain business lines of credit.

The other challenge is that there are hundreds of banks, credit, unions, and other lenders in the US, and it is extremely difficult for most real estate investors to navigate the path of obtaining business credit without potentially making errors or steps that can cost hundreds and thousands of dollars in higher interest rates, or add years of time in building business credit by applying at the wrong banks and lenders, getting denials, adding inquiries to their personal credit report, and potentially damaging their credit in the process.

Thankfully there is a program available to assist real estate entrepreneurs in establishing business credit and obtaining unsecured lines of credit for real estate companies. If you are looking for additional sources of capital that you can use towards earnest money, down payments, fixing fix and flips, and rehabbing rental properties, unsecured business lines of credit may be the option you were looking for.