Choosing The Best Fix And Flip Real Estate Funding

By Stephanie Bennett

For those interested in making a lot of money in property handling, then one of the best ways to do that would be fixing and flipping property. While the idea sounds absolutely attractive, the only challenge would be getting the right amount of capital needed in order to pursue the project. For that, there are three main fix and flip real estate funding options that one can try out.

The very first and probably most popular option for financing fixing and flipping projects would be the hard money loan. This happens to be the most popular simply because it is the easiest to acquire. It is a short term type of debt that is ideal for condo flipping wherein the holding period is only a year or less.

For those interested in taking up this sort of loan, he or she will notice that the approval time would only take about two weeks. After one gets the money in his or her palm, then the holding period will be only about one or three years, which is more than enough time to do up a piece of property. One of the cons is the high interest rate, but if the ROI of the endeavor is high, this should not be a problem.

In order to get this loan though, one has to have certain requirements like a good credit rating of around five hundred and a good income to debt rate. The income to debt rate should be around thirty five percent and it is also required that one has an experience of around three years in the real estate business.

A second option would be the equity credit line with two subcategories under it. The first is the home credit which is a long term credit line that has a fixed number of years for providing credit. The second type, which is the property credit, which is pretty similar but the term is based on the loan amount instead of being fixed.

Now, it would take a while for approval of a home line of credit, possibly up to 45 days. As for rates, it would range from around four to five percent depending on the lender. Also, one is required to have a credit score of six hundred forty and above, a debt to income ratio of forty five percent, and a minimum equity of thirty percent in property.

For the property credit line, the term loan would be around two years with a thirty days approval. As for the interest, it can be five percent up to eight percent. The requirements are similar to the home credit line except the figures are a little bit higher since this short term loan would be a little more high risk than the home credit.

Before engaging in this money making activity, take note of these three options that can be used for financing. The best one will depend on the preference one has for taking loans. As long as the options are here on the table, one will at least have a choice that he or she can consider for his or her budgeting.

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