If you are interested in flipping houses for a living, there is a lot to do in preparation. It is more than simply buying a house, fixing it, and selling it. Understanding the financial aspects of this career path can help you decide the best way to proceed.
While you can make a good amount of money flipping houses, there are a lot of costs involved, as well. Along with the actual purchase of the home, you will be responsible for all of the costs for fixing up the property, property taxes, homeowners’ insurance, and all utilities during your ownership. Depending on the length of time needed to fix up the home, these expenses can get costly the longer you own the home. These factors must be taken into consideration when seeking financing to purchase a home to flip.
Types of Financing
There are a number of ways that you can get the money needed for this type of investment. The three most common methods are hard money loans, conventional loans, and alternative lenders.
Hard money loans base your ability to borrow on your finances as well as the estimated value of the home after renovating. These loan terms are typically less than a year with an interest rate between 12% and 18% plus a fee calculated from the total amount borrowed.
Traditional lenders are conventional mortgages obtained through banks and other financial institutions. These lenders are typically bound by regulations and trends in the real estate industry, which may make for less flexible terms. However, longer terms are typically available compared to the one-year term of the hard money loan.
There is a growing body of opportunities through private or alternative lenders. These institutions may be more flexible with terms, including applications processes in order to accommodate your needs.
Whether you are new to real estate or just to flipping houses, understanding the financial concerns associated with the process is important for success. Select your financing options carefully so you can achieve the business goals you are seeking.