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What is a Fix N Flip loan?

This is a type of residential real estate investment where investors buy a property with the intention of quickly reselling it for a higher price. Generally, the property is a fixer-upper that they repair and renovate for the purpose of resale. A similar strategy, known as a β€œbuy and hold,” is where investors buy a property with the goal of renting it out, or β€œholding,” until the market becomes more favorable to make a profit on a sale. Although fix and flips have the potential to be super profitable, a lot of money goes into the process from start to finish, making it a costly project. This is where fix and flip loans come in to help mitigate some of those costs.

How does a Fix N Flip loan work?

Purchase

Investors use the loan to buy a property in need of repairs or updates.

Rehabilitation

Financing covers renovation costs to enhance the property's value.

Sell

After renovations, the property is sold to yield a profit.

Eligibility requirements for a Fix N Flip loan

  • Β Some lenders may require a minimum level of experience in real estate investing or flipping properties. This could be demonstrated through past successful projects or a track record in the industry.
  • While there are options for borrowers with lower credit scores, having a good credit score can improve your eligibility and the terms of the loan.
  • Typically, fix and flip loans require a significant down payment, often ranging from 20% to 30% of the property’s purchase price.
  • Β The property itself will also be evaluated, including its current condition, potential after-repair value (ARV), and the investor’s renovation plans.
  • Lenders may want to see a clear plan for how the property will be sold or refinanced once it’s been renovated.
  • Some lenders may require borrowers to have a certain amount of cash reserves to cover unexpected costs during the renovation process.

Benefits of a Fix N Flip loan

1

Opportunity for Profit

Investors can generate high returns if the flip is successful.

2

Reusable Capital

Profits from one project can be reinvested into future flips.

3

Property Revitalization

Contributes to the improvement of local neighborhoods.

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Loan Process

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