Maybe after your latest marathon of home renovation shows, you’re ready to take the plunge into the home rehab market. Even if you have little experience and less than perfect credit, you can find financing through one of these loan options.
Home Equity Line of Credit (HELOC)
If you own your home, you have an excellent source for financing as you can borrow a line of credit with your home as collateral. HELOCs have great rates, and you may be able to borrow up to 85% of your home’s value. You are only charged interest on the amount of money you use, and you can withdraw money as needed, making this one of the least expensive loan options.
Investor or Partner
Combine skillsets with another person in a fix and flip business. Allocate your responsibilities and share of the profit. Search for a partner with cash and financial connections while you handle the labor and work to combine forces into a prosperous business relationship.
Personal loans might be a reasonable option if you have excellent credit and don’t need a large sum of money. You may decide to use a personal loan to supplement another financing solution. A personal loan can be preferable because you don’t have restrictions on how you use the money.
Friends and Family
If the previous loan types are not feasible, you can try to secure financial support from friends and family. You are most likely to get the best rates from a relative or close friend. You won’t have to go through the heavy paperwork of a lending institution, but you may have to sharpen your pitch skills. That doesn’t mean you should eschew a contract. You can ruin a good relationship by neglecting to clarify expectations. Clearly define a repayment schedule and how to proceed in the event of a loss.
Hard Money Loans
Hard money loans are often used for fix and flip projects. The loan can provide all the funding you need in one agreement if you plan carefully. The APR is relatively high for hard money loans, but the rate might be worth it if you can quickly flip the house. No matter the financing you choose, remember to factor in carrying costs (property expenses, such as taxes and insurance), the origination fee, downpayment, material and labor charges, and closing costs at the home’s sale.
Real estate has always been a lucrative business. Decide on your best financing alternative, and you can get in on the home-flipping market.