WHAT IS A ARIZONA FIX AND FLIP LOAN
If you’ve watched shows like Fixer Upper or Flip or Flop on HGTV you’ll see why house flipping is all the rage. Watch just a few episodes and you will see how flipping houses can turn into a formidable profit.
A Arizona FIX AND FLIP LOANs is a type of loan where the borrower receives funds secured by the value of the property. These loans do not follow traditional financing. Financing is collateralized by the foreclosure of the property for which the loan is being made.
There are two components to fix and flips—literally to fix and to flip. An investor purchases distressed property below market value. Then, the property is rehabbed by making repairs and improvements— therefore increasing the value of the property. After renovation the goal is to sell it for a profit in a reasonably short time.
HOW ARIZONA FIX AND FLIP LOANS WORK
Every fix and flip starts with finding the property. Once you find the property you must figure out how to finance your project. There are four parts of your house flip that you will need to finance:
- The purchase price of the property
- The holding cost of the property
- Materials for the rehab (and labor if you are not doing this alone)
- Closing costs
The first thing you need to know is that you won’t be getting a traditional bank loan. The distressed properties do not meet FHA guideline and therefore do not qualify for traditional financing. So, very rarely are banks involved in Arizona FIX AND FLIP LOANs. Private money lenders generally finance Arizona FIX AND FLIP LOANs. The interest rate is higher than a conventional property loans due to the risks involved in financing the renovation and the expeditious turn around time.
WHAT TO DO BEFORE APPLYING FOR THE ARIZONA FIX AND FLIP LOAN
- Create a business plan— this will include the address of the property, comps (sale prices for comparable homes in the same general area), financial projections, an appraiser’s current valuation of the property and a back-up plan just in case the renovation doesn’t go according to plan).
- Estimate renovation costs— many flippers don’t borrow enough money—and that can easily lead straight to disaster. To make sure this doesn’t happen create a scope of work. This is a detailed outline of any repairs needed, the cost of the repairs and the timeline. This is where you will need an appraiser and contractor’s help. Both will work together to give you a quote and a timeline. It is imperative that you account for unknown issues that will arise. The scope of work will contain two very important numbers—the loan-to-value (LTV) and the after-repair-value (ARV). The LTV is a comparison of your loan size to the value of the property; an ARV is the estimate of the property after renovations are complete.
FINDING THE HARD MONEY LENDER
There are numerous options for finding funding on a Arizona FIX AND FLIP LOAN. Some possibilities are personal loans, lines of credit, using your retirement or a silent partner. However, most real estate investors know a hard money lender is the easiest and most straight forward lender. Hard money loans are from private investors or individuals. There are lower qualification requirements and both approval and funding happens in less than two weeks. These lenders are invested in your success. This is an investment for them as much as it is for the borrower.
Many people are finding success through ARIZONA FIX AND FLIP LOANs. It doesn’t require the borrower to have great credit or even a down payment. It involves strategy and determination—along with a disciplined work ethic.
Flipping houses can be a full or part-time job. The good thing about flipping houses is you don’t need a ton of start-up money or a great FICO score. It is a gratifying experience and your wallet will thank you for the experience.
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