How to Finance a Fixer Upper

Are you wanting to flip houses and are wondering how to get the money you will need or how to finance a fix and flip in general? We have you covered with this article on loans for investment property fixer-uppers. We make loans for flipping a house as easy as 1, 2, 3, but we also want you to understand your options.

For newer flippers, their most significant struggle is how to finance a fixer-upper in the first place. After all, without already having, or not knowing where to get the necessary funds for purchase and rehab, it is tough to get started. However, with private lenders like Abbey Mortgage, it is straightforward to obtain loans for fix and flip deals in most cases. Please keep reading to discover our best tips and how we can help!

Private Loans Help Answer How to Finance a Fixer Upper

Never let the term “private” or the often associated word “hard” scare you when it comes to investment property lending. Sure, there are unscrupulous lenders out there. However, that is only an issue when you do not do your research. As an example, Abbey Mortgage has been in business for more than 20 years and has many repeat borrowers. Whether you choose to use us or not, you should know with whom you are dealing.

When it comes to figuring out how to finance a fixer-upper, hard money loans are a great resource. After all, any mortgage, especially one for a fix and flip, should match your specific needs. For this reason, many investors always ensure they have a reliable hard money lender in their pockets.

Click here to learn more about hard money loans. However, in general, hard money loans are focused on the details of the deal itself and less on individual credit.

If an investor has a good deal on a property, some money, and the ability to fulfill repayment, you will likely get someone to loan you money. What this means is that if you think you have a good deal, you might, and it never hurts to have someone you can consult with and ask what they think.

As a private lender, offering hard money loan options, we have investors call us all of the time to discuss their investment ideas, about specific properties or potential deals. Hard money deals cost more, and there is no way around that. However, you need someone like Abbey Mortgage if you cannot get a loan.

When the time comes to figure out how to Finance a Fixer Upper

You also need a private or hard money lender when the loan process is going to take too long. We all know getting fast money is usually not very quick or easy using a typical bank or broker.

No matter what the reason, when you need money fast, you need to have a relationship in place. Developing a relationship with your preferred lender before you need cash means you have a better idea if you should make an offer on a deal in the first place.

A second advantage of aligning yourself with one reputable private lender means we can establish your financial stability and capability to complete a fixer-upper before you buy a property. Once you do find a deal, we can move very fast. We often close loans as fast as 5 to 10 days.

One more thing I would like to mention is that my company, Abbey Mortgage, has been loaning money to investors since the 1990s. We fund our loans from our own money, not money from a bank. I review every loan, borrower, as well as property for risk, value, and potential. Provided I can confidently establish the value of the property, and most of the time I can, tHen no appraisal will be needed.

I am a lifelong real estate investor, as well as serving on the local urban planning board.

We would need the property rehab budget and how much money you need to purchase the property. We establish loan amounts based on the value of the property at the time of purchase.

Professional investors know that it is better to make some money versus no money at all, even though the loan will come at a premium.

We also provide cash for investment property rehab and refinance. If rehab money is needed, we can add it to the original purchase loan. Rehab money provides the cash you need to fix up a fix and flip or other investment property. You get a cash infusion in the form of a draw at the beginning and established goal completion.

How to Finance a Fixer Upper With a Bank Loans

As we have said, you should always consider all the different methods regarding how to finance a fixer-upper. The biggest reason is that our primary source of funds, our bank, is not designed to react quickly to fund fix and flips or any deal where cash is needed immediately. Standard mortgages, as an example, are not intended for approval in days or fast repayment in mind.

Beyond the traditional bank loan programs, banks also offer government-backed loans that can help get money to fund some fixer-uppers. Fannie Mae has a program called the Homestyle Loan, which has provisions for financing the purchase of single-unit investment properties.

Traditional bank loans are not always easy to get, and they are certainly not fast. However, if they work for you, that is great as they can save you some interest over hard money loans. There are some great programs like this out there, even though the approval process can be complicated and take weeks, if not months, to close.

Cash-Out Refi

Once you have an established real estate investment portfolio, you will find that cash-out refinancing will become crucial to your operation. Cash flow is king, and when you need it, you will probably need it fast.

You can refinance existing properties so you can buy another property. The limitation is typically the amount and status of any current mortgage.

Refinancing your investment properties works even better after you own multiple properties. It provides a natural and easy way to use your property’s equity to help solve the problem of how to finance a fixer-upper.

Line of Credit

Did you know there is a line of credit designed for this reason? An investment property line of credit functions like a typical home equity line of credit. However, they provide operating capital and to purchase investment properties.

These lines of credit are instrumental because of the ability to gain immediate access to money whenever it is needed, without borrowing it until you need it.

Home Equity Line of Credit

For those just starting out and even seasoned investors, the use of a second mortgage or home equity line of credit (HELOC) is par for the course for a career in fix and flipping.

The bank will base your line of credit on your home equity. You can borrow up to your loan amount and use that money to add to your portfolio or make necessary repairs or upgrades. You can only get a HELOC on your primary residence. If your current home has significant equity, this is a very effective way to get into flipping.

Get A Bridge Loan, Um What is a Bridge Loan?

When you are in the business of flipping homes and investing in real estate, you will end up in-between real estate investment deals. It can sometimes be scary figuring out how to get the money you need. Enter the bridge loan, which is a short term temporary loan for investment deals. They work well when an investor needs cash to purchase a property while trying to sell another.

These loans offer investors a lot of flexibility because they can buy new properties without a contingency.

How to Finance a Fixer Upper with a Solo 401(k)

Most people may not think of the Solo 401(k) plan as a financial tool for real estate. However, this program allows investors to use their retirement funds to invest in real estate while enjoying many of the tax advantages of a traditional 401(k). Those who are self-employed and small business owners who have no full-time employees can use the Solo 401(k) to invest in real estate.

Have You Ever Heard of Crowdfunding

Don’t laugh. Crowdfunding has become an increasingly popular way to fund investment deals, projects, and maybe even your next real estate project.

It works by allowing investors to invest in either the debt or equity of a project. For putting their money into an investment pool, investors, in turn, receive a stake in a project or investment.

Credit Card

The last funding method investors have available to them is as simple as using a credit card. Credit cards are probably the most useful form of credit for borrowing over a short amount of time.

Just always remember that if you don’t pay the money you borrow back within 30 days, the interest will be applied. Using credit cards is very obviously more useful for buying tools and supplies versus buying properties.

It is high time to get started

We hope you have learned something about fix and flip loans. Now we want you to know you can rely on Abbey Mortgage when you need a loan for an investment property in Colorado. We offer multiple loan options for many different real estate types. Call us today to see how we can help you get the funds you need for your next deal!