This presents potentially profitable projects for investors who are capable of completing the necessary work and sell them at higher values. However, despite the potential upside ROI, these properties are typically more difficult to finance through conventional institutional lenders, due to the property conditions, investors’ employment types and financial situations, pressing timeline and other factors.
In these cases, a fix and flip loan could be an ideal solution. It would enable the buyers to submit non-contingent, all-cash offers with a quick closing, which are what the sellers prefer, therefore increase the likelihood of having the offer accepted, even if the properties or timelines might not meet the guideline for conventional lenders.
Therefore, the value for this type of financing is to allow buyers to seize the opportunities they might not otherwise have, and proceed with enough liquidity to complete the renovations and the resales of their house flipping projects.
Institutional lenders typically have to go through a complex and time-consuming process to approve, underwrite and close the loans, requiring contingencies from the buyers such as appraisal and financing contingencies that weaken their offers, while taking longer to close (30-60 days). On the other hand, a fix and flip loan from a private lender could take as little as 5 days to close, and in many cases not requiring any contingencies, which makes the offer packages significantly stronger for the sellers, especially in competitive markets and cases where multiple offers are expected for desirable projects.
Fix and flip loans are ideal for investors who need reliable, reactive capital to move quickly on purchasing distressed or older homes in need of renovation. They can be presented to a seller as cash offer very quickly, which allows investors to move decisively on great opportunities. With much competition in the space of house flipping, speed and reliability of funds are key components of a successful operation for professional investors seeking a consistent deal flow.
Fix and flip loans can also be used in cases where financing has fallen through with other lenders, and the buyers are now facing an urgent timeline to close. They can help the buyers continue forward in their deals without losing time, momentum or security deposits, and continue onto successful projects.
If you are interested in learning more about fix and flip financing, please Contact Us.
