There are people who buy real estate property, repairs them, and seems to be doing great in selling it fast and making profits out of it. But note that the main ingredient to making this endeavor a success is getting capital. This goes to say that if you do not have enough funds but is into rehabbing a property, then your great financial option is someone who can offer a fix and flip loans called a hard money lender. Know that these loans have a structure that will allow you as the purchaser to acquire the property and at the same time have access to a fund reserve for its renovation or construction costs.
There are advantages of fix and flip loans when you buy, repair and sell quickly a real estate property, an activity that is seemingly a profitable venture.
The immediate advantage in getting fix and flip loan is its fast approval. It is said that compared to the traditional banking system, getting approved for a fix and flip loan is a faster process. A private lender can approve your loan within just a couple of days after you have submitted the necessary documents, compared to the traditional financial institution that would take at least a month to process your loan.
The next benefit in obtaining a fix and flip loan is that properties in different states of the condition would qualify for the loan. With a property that is bank owned, a short sale, a foreclosure, or in a dilapidated state, a borrower will have difficulty in getting funds from a traditional financial institution. It is a fact that there are strict rules that banks follow in accepting the kind of property they will place under their loan portfolio.
With fix and flip loans, there is zero prepayment penalties, thus prove to be an advantage for a borrower. This means that fix and flip lenders will not subject you to penalties called prepayment penalty if you can pay off the loan before its maturity date.
Another benefit of having a fix and flip loan is that repair costs for the property are covered. Thus, you will have a good amount from your budget that can be spent on renovation and construction costs when you purchase a property with the goal of flipping it. Thus your stress and pressure from developers or builders will be taken off from your shoulders since you do not have to worry in getting your own money for repayments or repairs.
In choosing a hard money lender, it would be good to keep some things in mind.