Getting in on the fix and flip real estate model can be a very lucrative investment strategy. Knowing who to turn to and which Arizona Fix and Flip Loan is right for you is often the biggest hurdle to successful entry.
If you are looking to change careers and seeking a healthy income, you may want to look at flipping houses as a business. According to reality TV shows on flipping houses, you don’t need an extensive education and it is relatively easy to do. In reality, it isn’t quite as easy as “reality” shows lead you to believe. Technical knowhow and proper planning are essential; however, one of the greatest roadblocks is obtaining funding for the project. Remember the old axiom, “It takes money to make money.”
So, you have setup your company, created your business plan, and are left wondering how to get the money to start your project. One approach that is particularly helpful for first time fix-and-flippers is to ask friends and family for start-up money. You may also want to approach private investors and Arizona Hard Money Lenders, which are some of the best sources for funding for flipping houses. Compared to traditional banks, they ask for a lot less paperwork, fund in days instead of months, and offer flexible terms with no pre-payment penalties. They look at the property and take into account before and after repair values as well as your ability to complete the project successfully.
Other investors consider taking out a mortgage loan. While rates from traditional lenders can be relatively inexpensive for investment properties, loans from traditional lenders are not always practical. When starting out, a mortgage loan may not be your best option. Traditional lenders are quite slow in closing a fix and flip loan. If your strategy includes short sales and foreclosures, traditional lenders are not always the speediest way to go and the delay can cost you prime property. Traditional lenders are also seeking W-2 or paystubs to verify income and, if you are a real estate investor or self-employed, your verifiable income may not be what the traditional bank is looking for.
After-Repair Value (ARV)
The traditional lender only looks at the appraised value and not the “after repair value” or ARV of the property you are seeking to flip. If you are flipping a house, the appraised value will be much lower than the after-repair value. Traditional lenders require that you have strong credit to get approved for your Arizona Fix and Flip Loan while alternative lenders, such as private and hard money, are less concerned with your credit and will look closer at the property you are seeking to flip.
If you are starting out, it may seem as though it is impossible to find any Arizona Hard Money Lenders that will offer you a loan, but, as Newt Gingrich once said, “Perseverance is the hard work you do after you get tired of doing the hard work you already did.” Hang in there and persevere.
When you finally obtain the Arizona Fix and Flip Loan you are seeking from An Arizona Hard Money Lender, you will face interest rates from 5 to 20 percent and may have to pay points from 1 to 10 percent upfront. Once you have established a relationship with a lender and you’re in business longer, the two of you will be able to negotiate future deals. You may also be offered interest only payments and there should be no prepayment penalty. Call us at Setabay for a no-obligation quote. Our rates start as low as 5.99 percent.
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About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.