How Does A Fix And Flip Loan Work


How Does A Fix And Flip Loan Work

 Lack of capital is a  factor that prevents potential real estate investors from actualizing their capability. If you are a budding real estate investor who lacks the money to actualize your potential, then fix and flip loans are what you need.

Flipping houses have grown in popularity over the years. House flipping has the potential to grow your investment portfolio and can generate income in a short period. The majority of people are unaware of the various kinds of loan programs that are available to help. Fix and flip loans are an easy means of generating money for your house flipping project.

What Is A Fix and Flip Loan?

Fix and flip loans are short-term loans that an investor can use to buy a property and cover the cost of repairing and renovating that property. A fix and flip type of loan are like a bridge loan. Both can cover expenses for the short term until a permanent long-term financing solution gets put in place.

A Fix and Flip Loan can help an investor cater for the costs of buying and renovating a property and can be paid back once the property is sold or refinanced. Investors can opt for a fix and flip loan because it needs less underwriting compared to traditional loans. An investor can acquire this kind of loan if they prove that the property they need the loan for is profitable.

Fix and flip loans are short-term loans that can range from six months to three years. Flippers pay off these loans with the profits they get from selling the property. The sooner the property is renovated and sold, the sooner the loan gets paid off.

Is A Fix and Flip Loan Similar to Hard Money Loan

Short-term loans are also known as private money or hard money loans.   Such loans are different from traditional mortgage loans. Fix and flip loans are also not similar to hard money loans. Hard money loans often do not go beyond 65 percent of the value with fewer or less underwriting restrictions. They also base the loan on the value of the asset. On the other hand, Fix and Flip Loans can lend up to 100 percent of the rehab costs and 90 percent of the purchase price.

Hard money loans and fix and flip loans are similar in that they both finance property using private fund hedge money, but there are still significant differences between the two. One key difference is collateral. A fix and flip loan lender has different concerns compared to a hard money lender. The primary concern for fixing and flipping is the property and the borrower. Hard money lenders are concerned with property. Small companies and private lenders can secure these types of loans by considering the property as collateral. A lot of time does not get wasted looking at the credit score of the borrower.

How Do Fix and Flip Loans Work?

Typically, an appraiser from the lending company visits the property to measure the value. They do so to ensure that it is worth the amount the borrower is asking. After the appraisal, the funds get generated within the same week.

The lenders are usually more concerned with the value of the property than the borrower’s credit score. They are sure that the borrower can pay back the loan once the property sells. Borrowers are left with the burden to use the fix and flip loan to ensure that renovation and selling happen quickly. You can make a decent amount of money even after paying back the loan with profit from the sold property.

Steps to Get A Fix and Flip Loan

Keep in mind that as an investor,  you will require money for a down payment. The following are the steps to acquire a fix and flip loan:

  • Pre-approval stage – During this step, the loan officer evaluates if the project fits the fix and flip loan criteria, the property location, proof of funds, the rehab, and prospective value. The borrower gets evaluated by analyzing their financial background, credit, and previous experience.
  • Processing and underwriting stage – Property value and customer’s buying and banking history get analyzed. If the lenders are impressed with the numbers, the borrower moves to the funding stage.
  • Funding stage – The signing of documents and paperwork gets done before releasing the funds. Once the underwriter and closing agent are satisfied, funds get disbursed to the borrower.

 Why Use A Fix and Flip Loan?

Borrowers new to the real estate world can use fix and flip loans for their flipping projects. Existing real estate investors can also benefit from these loans.

Below are the benefits of a fix and flip loan:

Fast Approval

Fix and flip loans get approved within the same week of application. Compared to traditional loans, the application process is fast. Fix and flip loans do not need a lot of paperwork, making the process less tedious contrary to applying for traditional loans.

Lack of pre-payment penalties

Unlike traditional loans, fix and flip loans have no penalties if you pay the loan back before the maturation date.

Reliable collateral

The property is secure enough collateral. Your lender can take ownership of the property if the sale does not give you enough profit. Traditional loans are different. Once you default, you start to worry about your credit score,  bad credit,  and the property itself.

Variety of propertycovering-repairs-fix-n-flip-quickline-capital-partners

There is no bearing on what type or condition of property flip and fix loans can cover. By contrast, traditional loans give strict restrictions on the type of property they can fund.

Covers repairs and renovations

Fix and flip lender have a ready set reserve for renovation costs. When flipping a property, a significant amount of money gets used on both construction and renovation. Borrowers are relieved of the burden to pay out of pocket for certain renovation costs.

Uniquely structured

Loans tailored towards a specific purpose guarantee success. Fix and flip loans are structured specifically for projects that require flipping. Most of the flipping projects get accomplished within one year. The majority of credit unions and banks cannot agree to such a period. Loans tailored towards project needs help to ensure organization in terms of budgeting.

Increase buying power

Fix and flip loans have a lower down payment compared to traditional loans. As a lender, you can increase your buying power and the potential to generate a decent amount of profit on the property that you flip. You can be able to leverage your down payment. Also, fix and flip loans benefit borrowers who do not have upfront cash for their projects.

To know more about this and other types of loans, you are most welcome at Quick Line Capital. Our offices are at 4713 Crossroads Park Dr – Suite 101, Liverpool, New York. You can also reach out to us by calling 315-437-0001 or start you loan application at