The Best Loan Options for Investment Fix-and-Flip Financing

DIY fans have made it clear: Purchasing homes to renovate and resell is on the rise. All you need do is turn on your favorite home improvement channel to see all the shows following people who do just that. Some people make a living flipping homes, and you want in on the action. You have some of the skills but no idea how to get started. You aren’t necessarily familiar with how commercial real estate works.


The first thing you probably need to do is figure out your financing options. Unless you are sitting on a large sum of money you can use to purchase property, chances are you will need to explore finance options to make your fix-and-flip dreams come true. Luckily, there are a few options from which to choose.


Using Investor Funds


The very nature of the fix-and-flip business makes traditional financing more difficult. You have to obtain a loan for not only the cost of the property, but also additional money for the renovations. If you’ve ever renovated anything substantial, you are aware that the costs can sometimes come in higher than first thought. You need to have money available to cover the higher prices.


One way to obtain financing for each project is with a field of investors. These can be business-oriented people who you’ve pitched your plan to, or it may be a group of friends and family who believe you are capable of giving the rate of return you’ve calculated. No matter which way you go, make sure you have iron-clad agreements in place with each person.


Using Your Home


Chances are you’re a homeowner yourself. If you own your house and have some equity built up, consider taking out a HELOC, or home-equity line of credit. You may have enough value in your home to cover the entire project.


Using Your Retirement Account


Almost any financial advisor would against dipping into your 401(k) account; however, if you have exhausted other opportunities, you may want to go this route. The key will be in returning the money borrowed or withdrawn before suffering any repercussions from the IRS.


Using Your Credit


If you’ve maintained good credit, you may be able to obtain a personal loan for a commercial real estate investment. This is a good strategy if you plan on starting small with little investment required.


Being able to fund a fix-and-flip business may be trickier than you thought, but it can work. There are many options out there, and with commercial real estate investing on the rise, you may find others willing to invest in your dream.

The Best Loan Options for Investment Fix-and-Flip Financing

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