Flipping houses has become a popular money-making endeavor in recent years. A quick flip through homeowner channels on TV shows program after program of industrious individuals flipping houses to turn a profit.
If you want to get into flipping houses in San Diego but don’t have the financing, a fix-and-flip loan can help.
What Is a Fix and Flip Loan?
Fix-and-flip loans are short-term financing options that allow real estate investors to flip houses.
Fix-and-flip loans can be either small business or private money loans. They can not only help you buy properties and finance improvements and renovations but also cover any additional expenses associated with flipping the property, such as listing and selling it.
Fix-and-flip loans can be structured in various ways depending on the lender and your financing needs. In general, they’re asset-based loans, meaning they’re secured according to the property’s value. This technically makes them hard money loans, as financing is based on the value of the asset.
What Do You Need for a Fix and Flip Loan in San Diego?
When trying to figure out how much you need for fix-and-flip loans in San Diego, you should use the loan-to-value ratio (LTV), which compares the size of the loan you’re requesting to the value of the property.
In general, fix-and-flip loans have an LTV of 90%. That means if you’re purchasing a property that costs $100,000, the lender who offers LTV at 90% will finance $90,000, and you’ll be responsible for the remaining $10,000.
Many lenders of home flip loans use ARV, or after-repair value, instead of LTV.
Let’s say the $100,000 property you’re purchasing will be worth $200,000 after renovations. In this case, a lender offering a loan at 70% ARV will finance $140,000.
Advantages of a Fix and Flip Loan
Fix-and-flip loans in San Diego boast several advantages.
For one thing, they usually have flexible terms. Since traditional money loans provided by financial institutions are subject to extensive regulation and red tape, their terms tend to be much stricter. Private lenders, on the other hand, can determine their own criteria for financing, which means you can get more flexibility out of a loan to flip homes in San Diego.
It’s also easy to get fast approval with a fix-and-flip loan, and several different types of properties are covered. As such, the property’s condition doesn’t factor into the issuing of the loan.
Another benefit of fix-and-flip loans is that they don’t have prepayment penalties, meaning you’ll retain the profit from the property sale.
How to Apply for Fix and Flip Loan with Bad or Low Credit
Even if you have weak credit, you can get fix-and-flip loans in California by presenting a detailed plan of how you’ll pay back the loan once you’ve renovated the property.
Lenders are more concerned about the asset itself than they are with your personal credit. Consequently, demonstrating the value of the property, especially its ATV, can help you secure a loan.
You can also apply for a loan with a cosigner, as this usually increases your chances of getting approved.
Don’t be afraid to compare lenders to see what their rates are. Some fix-and-flip loans have higher interest rates than others since these terms are at the lender’s discretion. Shopping for rates is a good way to ensure that you get the best rate possible for your project.
How to Get Approved for a San Diego Fix and Flip Loan from BEST Lending Co.
Real estate investments are a great way to build wealth. At BEST Lending Co., we offer fix-and-flip loans in San Diego with competitive interest rates to aspiring real estate investors.
Our application process is fast, simple, and 100% online. We send preliminary quotes to our clients within two hours and have an average financing rate of five business days. Get started on your next real estate investment by applying now.
