Everything you need to know about house flip loans

If you happen to be a real estate investor or are planning to become an investor in the real estate market, then you would have surely across something called house flip loans.

Don’t know what it means yet, don’t worry we are here to help you out.

What exactly are house flip loans?

These loans are meant for investors who intend to purchase properties then make some renovations to it, with intent to sell it further at healthy profit margins. These loans are usually very short-term loans and they last around 6 to 18 months. Such loans are commonly used when investors intend to buy properties at either auctions or during foreclosures. While construction loans are actually used for constructing a new building. On the other hand, house flip loans entail buying the property and then paying for its construction and renovations. 

What is the collateral for such loans?

One negative thing about these loans is that people who take out such loans will have to pay much higher interest for them in comparison to traditional home loans. One positive thing is that the collateral in such loans is the property itself unlike house flip loans where the collateral includes the property and also the personal credit of the borrower.

Is it easy to get such loans? 

In today’s day and age, more and more people are getting into the business of house flipping, which has made, house flip loans, all the more popular. Some people think that it is a very complex procedure to get these loans but such people couldn’t further be away from the truth. The truth is that getting such loans is actually very easy. 

The key benefits of house flip loans

Read on further to know the key benefits of house flip loans.

1. Very fast approvals: – The house flip loans are approved very quickly in comparison to traditional loans. This has mainly to do with the fact that house flip loans are actually approved by private investors and not by banks or credit unions or other financial institutions. One can easily apply for such loans. All the prospective borrower needs to do is to present a plan detailing how they can pay off the loan after the property has been renovated. All is smooth-sailing from thereon because the interest of the lender lies in the property itself rather than the investor. If all goes well, you can expect to get your house flip loan sanctioned in just a few days and such loans.

2. No Pre-Payment Penalties: – One of the major cons associated with traditional loans is that you can end up getting penalized if you intend to pay off such loans before their maturity date. On the other hand, no such penalties are involved at any stage with house flip loans. Pre-payment penalties can actually eat away at your profit margins so you don’t want to go through them then you might want to consider opting for house flip loans. 

3. Secure Investment:- Such loans are actually very secure investments because if you fail to repay the loan then the lender will simply take possession of the property, which is considered as the collateral. Unlike traditional loans, in house flip loans, you won’t have to worry about your property or personal credit going into default. 

4. Wide range of properties:- Another benefit for prospective borrowers of such loans is that the current condition of the property has absolutely no bearing on the ability of borrowers to secure house flip loans. On the other hand, institutions that provide traditional loans have a lot of restrictions on the type of properties that they might want to extend loans for. Thus, if you are looking to finance properties that are currently in a very bad condition then house flip loans are the best way to go forward.

5. All repairs are covered by these loans:- For properties that you intend to flip you might have to spend a lot of money on the renovations. Thus it makes to go for house flip loans because the lenders of such loans will set up loan reserves that you can use for covering all the different costs of the repairs. This can ease the pressure of the borrowers because they won’t need to worry about paying anything out of their pockets for repairs or other payments. 

6. Structured mainly for flipping properties:- Perhaps the single biggest benefit of such loans is that they have been specifically structured for the purpose of flipping properties. These loans are a great boon for flippers because they have been structured mainly for house flipping projects. 

7. Terms are very flexible:- Traditional loans from traditional financial institutions are subject to a lot of regulations, structures as well as processes. It is important for the prospective borrower to follower all such terms and conditions to the T. On the other hand, house flip loans have very flexible terms and conditions and if you can’t get such loans approved by traditional lenders then you can always approach a private lender for the same.

8. Increase your buying power:- Another point favoring house flip loans is that such loans have a very low down payment. What this means is that such loans can increase the potential buying power of borrowers. Increased buying power means increased potential of the borrowers to make huge profits on their flips. 

The Bottom Line

If you know other people in the flipping business then you must reach out to them, you increase your chances of finding the best lender for such loans. Once you have narrowed down your search to the best possible lender, then you must produce all the necessary documents that might be required for reaching a satisfactory agreement. If you are able to convince the lender in question about the worthiness of your project then you have very high chances of getting your loan sanctioned.

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