house flipping financingHouse flipping financing requires a different strategy depending upon how long both you and your buyers intend to keep the property.

One is more expensive than the other; how so?

For investors who intend to acquire and hold real estate for the long term do so to accumulate wealth over time through property appreciation while making money each month from rental income.

Investors who intend to buy then quickly sell make their income on the different between their acquisitions and rehab cost and the final sales price.  And both will need different types of financing.

For the investor who doesn’t have the cash or otherwise doesn’t want to tap into it, house flipping financing means a loan lasting for a relatively short period of time, say 90 days.

Short term house flipping financing will provide enough funds to buy the property and prepare the property for sale.  If the investor bought the property for $75,000 and needed $20,000 for repairs, the short term loan will be for approximately $95,000.

Traditional lenders won’t make a loan on a property in disrepair but private lenders will. A private lender, either an individual, or a company that specializes in financing flips can issue a loan on a property, secure a lien on the home and get paid when the flip sells.

Short term loans are characterized by higher rates and fees but provide a way for investors to acquire, prepare and sell real estate.

When a flip is completed and needed repairs are made, buyers can find financing from most any mortgage company from a bank to a mortgage broker.

These loans, called permanent mortgages, are the typical 30 year and 15 year loans underwritten to Fannie Mae and Freddie Mac guidelines and offer the most competitive rates and fees in the real estate financing arena.

Talk soon,

David Slabon