Flipping houses isn’t only popular on reality television, it is a popular way to bring consistent income into your life.
The average profit for flipping a house was $65,000 in the past year which means it’s about a 45% return on investment.
Sounds pretty great right? With cost-effective renovations, and choosing a good neighborhood to invest in, you can make quite the profit.
To begin your house flipping project you’ll need some cash upfront to begin renovating.
But where do you get the funds to start? Read about the best loans for flipping houses here.
Traditional Bank Loan
This option is best for those who have excellent credit, enough money saved for a down payment, stable income, and if you’re trying to renovate the home for over 5 years or more.
This kind of loan is just like any other mortgage loan. You can decide how long your loan term will be with lower interest rates compared to other options.
The downside is that it can be difficult to attain this kind of loan if you don’t have a solid history successfully flipping houses in the past.
Hard money loans or “rehab loans” are short term loans solely for real estate investments. They are given by private lenders and usually give you 6 months to 1 year to buy, renovate, and sell the home. The max amount of time given is 5 years.
Lenders can be a group of investors, an individual, or mortgage brokers. Interest rates are typically high for this kind of loan.
These loans usually cover about 60-75% of the value of the property with you having to pay the remaining balance upfront.
This loan is a good option with those with lower credit scores and who want a shorter process than a traditional bank loan. The home that you intend to flip is the collateral for the loan so this option is best for those who have flipped homes in the past.
Home Equity Loan
You could use a percentage of the equity you’ve accumulated in your home. This means that you would be using the equity in your primary residence as collateral.
This kind of loan gives you access to the cash right away while you make monthly payments for the amount of time the loan is for. Similar to when you first started paying a mortgage.
The benefit of this loan is that the interest rates are usually low compared to other options and you can borrow up to 80% of the equity of your home.
Start the Process of Finding the Best Loans For Flipping Houses
As mentioned above, choosing the best loans for flipping houses for you is a personal journey. Taking into account finances, credit score, and the length of time you need will ultimately affect what you decide to do.
Talking to professionals and doing extensive research will lead you to pick the best option.
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