The Correct Way to get a Fix and Flip Loan
"Sure, we can do that." This is the common lender reaction to the initial discussion about a property loan. I am not exactly sure it matters much what the loan is or how certified you are, though fix and flip loans in Florida are especially a concern; this is the reaction you need to expect. The problem, obviously, is that this is banker speak. Banker speak is a lender saying you what you wish to hear.
Maybe I am being unfair. Some lenders are honest and transparent-- from my experience, however, they are also often trying to loop you in, in hopes they can find out the offer later on, which nearly never takes place. I have actually always said that if your plan is to finance your property task with a bank, you better have a Strategy B. I have actually witnessed too many celebrations where lenders took their time deciding, risking offers for unwary fix and flip investor in Illionois.
So, what do you do if the bank backs out or if you feel in one's bones it is not going to fund your project? Here are three methods to keep your offer alive:
Private Loan: Private loan is merely borrowing from a private specific or group. The advantages of this are that you will be speaking with the decision makers and can structure deals that work for everyone. Personal lenders will have a lot more versatility than a bank or traditional lender. The problem could be encouraging a private lender to loan you cash. Plus, the interest can be high for fix and flippers in Texas.
Difficult Cash: Hard cash is personal cash from a professional lender. (Full disclosure: This is a financing option my company offers.) A common hard-money lender has actually done the hard work of generating the capital and is ready to loan it to you. There will likely be some underwriting standards, including a low loan-to-value ratio, which is the loan quantity compared to the value of the home. It is not uncommon for a hard money lender to loan 90% of the property's value. If you are doing a fix and turn, a good difficult money lender will loan 90% of before-repair worth. Hard cash loans have available funds and are often a lot easier to get approved for. If you find a strong adequate deal, this might enable you to obtain all the purchase and repair cash for your task. No bank will do that but specialty fix and flip lenders in Maryland will.
Partners: If you are having trouble getting a loan however have a good deal you wish to finance, a partner might be the method to go. Yes, you will need to share a few of your earnings, but if a partner has the cash required for the deposit, the credit needed for the loan or something else that assists get the deal done, it deserves thinking about. As they say, a piece of something is better than all of nothing. Though even with a partner, you still might need a fix and loan to buy property in Maryland.
I don't mean to be too harda on banks or bankers. In fact, I simply closed with a count on an advancement deal worth a large quantity of money-- an amount I might not have made with partners or personal cash. As you move through your realty profession, you will find that you will need banks at times. I am hard on them because they are frequently challenging to deal with, however I would not be where I am today without them. I like banks because they use low-cost loans, so you can make more cash on each deal. That stated, I constantly have a strategy B. Smart investor will always be ready for banks to change course or not like my deal and be willing to look for alternative funding options when they need to get an offer done for a fix and flip in Texas.
