How To Get Financing for Fixing Up and Flipping a House
Fixing up and flipping houses can be a very profitable endeavor. The problem for most flippers is that you need cash to purchase to house, renovate it and sell it. Here are some good ways to get fix and flip financing.
- Use Your Home's Equity
If you own your home and have enough equity in it, you can get a home equity loan or home equity line of credit to finance your flipping project. A bank will usually lend you up to 85% of the value of your home, minus what you still owe on the home. You will also need to prove that you are able to make payments on the loan or line of credit and that your credit score is good.
- Take Out a Personal Loan
If the amount you need to borrow is not too large, you may be able to get a personal loan to cover it. A personal loan normally is limited to about $50,000. You will need to have a credit score of at least 650. You would make monthly payments on the loan for up to seven years.
- Borrow from Your 401(k)
Borrowing from your 401(k) can be risky if you are near retirement, but if you are younger, you may feel that it is worth the risk to do so. Most 401(k)s will allow you to borrow up to 50% of the amount you have saved, up to a maximum of $50,000. An advantage of borrowing from your 401(k) is that when you pay it back, you are paying the interest to yourself instead of to a lender.
- Consider a Hard Money Loan
The term "hard money loan" may be a bit scary because of the high interest rates and fees charged for these non-bank loans. However, you will probably fix up and flip the property pretty quickly, so you will not need the money for very long. Hard money loans are easier to qualify for if you have poor credit, and you can get the money fairly quickly.
- Get a Partner or Borrow from Friends and Family
If you can't get a loan any other way, you may be able to find a business partner or someone in your group of friends or family who can lend you the money. Be sure to put everything in writing when you do this.Don't let a fix and flip deal get away from you. By being creative and looking into these financing options, you should be able to find a way to finance your project.