Flipping houses is appealing to many people, but actually doing it is tough. One of the toughest parts of flipping is getting the money to buy a flip. There are a number of ways to finance a flip. I flipped 26 houses last year and financed all of them.
What are the different ways to finance a flip?
You could pay cash for a flip, but most people don't have the money to buy the house, pay for carrying costs, and repair the house. You actually make more money financing flips anyway.
https://investfourmore.com/2015/06/12/should-you-use-cash-or-financing-when-flipping-houses/
Here are some of the ways to get the money for a flip:
- Hard money lender. A hard money lender specializes in financing flips. Hard money is not from a bank, but an investment company. The company borrows money from an investor, then loans that money to another investor at a higher rate. Hard money used to cost 14 percent and 2 or more points. Rates have dropped to under 10 percent for many lenders. Some hard money lenders will lend up 90 percent of the purchase price and all the repairs.
https://investfourmore.com/2017/09/20/podcast-119-hard-money-loans-fix-flips-ben-shaevitz/
- Private Money. Private money is from an individual who lends money to a flipper. Many hard money lenders call themselves private money lenders, but that is misleading. I borrow money from many private money lenders. They are people I know personally. Some of my lenders will give me all of the purchase price and repairs on a deal.
https://investfourmore.com/2015/09/21/how-to-find-a-private-money-lender-to-flip-houses/
Crowd Funding. Crowd funding is very similar to hard money, but there are many investors loaning smaller amounts of money. https://investfourmore.com/2017/07/06/podcast-108-crowdfunding-offers-smaller-real-estate-investment-amy-kirsch/
Local Banks. I also use local banks to finance flips. The terms and rates can vary greatly based on the bank. My banks want 25 percent down, and do not finance repairs, but they offer rates around 5 percent.
https://investfourmore.com/2014/03/19/finance-fix-flips-hard-money-private-money-portfolio-loans/
- Partners. One way to get started flipping is to use a partner. A typical partnership has one person lending all the money and the other person doing all the work. A typical split would be 50/50 in the profits.
https://investfourmore.com/2015/04/27/should-you-use-a-partner-when-investing-in-real-estate/
What do you need besides financing to flip?
Even with financing you need some money to flip houses. Besides money you need great contractors, and great deals. The link below shows all my active flips.
https://investfourmore.com/flips/
