Are you looking for an investment opportunity by flipping a home and making a profit? If so, you are going to need a lot of cash to make that initial home purchase. It won't require a traditional 30-year mortgage to get the job done, which is why many investors look at shorter loan options to get them the capital that they need. Here is what you need to know about 4 of these short-term loan options.
It may be beneficial to join up with another investor in the area for joint venturing lending. Consider it a partnership where one entity brings the money to the table to make the home purchase, and you bring the knowledge of how to flip the home and make a profit. This is a form of financing that can really benefit those that do not have great credit but have the ability to get the job done and simply need the cash. Your lender is investing in you as a person and not just looking at your credit score.
Hard Money Lending
A hard money loan is different from joint venturing because you are going through the traditional lending process with underwriting involved to approve your loan. Those costs associated with underwriting are then passed on to you in the loan's closing costs, which can make the loan more expensive than other loans. The interest rate for hard money loans is also going to be a bit higher than what you will see with other loans, but you may find it more accessible to use this type of financing than seeking out joint venturing on your own.
A private lender is exactly what it sounds like, which is going to an individual that wants to make money on an investment. Some people prefer a private lender because of the flexibility this type of loan provides. You don't have to pay for underwriting fees, closing costs, points, and things of that nature. It's the agreement that you decide to work out with the private lender, so it can be what works best for your specific fix and flip.
Crowdfunding has become a lot more popular over the years since you are pulling in small amounts of money from many investors in order to fund your project. You set the terms, let the lenders know the anticipated return on their investment, and you campaign to raise the money that you need. The downfall to this type of lending is that it takes more work to generate interest, and you may not reach your goal in a fast manner.