Arkansas Fix and Flip Loans

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The best way to invest in real estate, or in anything for that matter, is using “OPM”. In other words, use other people’s money! There are many ways to invest in real estate without spending a dime of your own money.

One of the most popular strategies to make money in real estate is by flipping houses. It’s a very legitimate way of making a ton of money in a short amount of time.

You can buy a fixer upper, renovate it and have it back on the market within a month or two. Some individuals are doing 2-3 fix and flip projects in one year on the side while working their full time job. It’s a great little side hustle to get into.

Arkansas has a great environment to run these types of fix and flip projects. There are a ton of ugly houses that need a ton of work in great neighborhoods that are appreciating in value. Those are the deals you want to look for. And again, you don’t need to use any of your own money!

So how does this work when banks and most lenders require at least 20% as a down payment. Some require considerably more.

That means if you’re looking at a $100,000 house, the bank will require at least $20,000 as a down payment.

So in this case, you’ll need at least $20,000. But that’s not all! You need to pay for the renovations that could costs twice or three times that. On top of all that, you need to pay insurance, maintenance, utilities, HOA, real estate agent commissions and other little ongoing expenses.

The best way to do this is by using other people’s money. Here are a few common funding options to get fix and flip loans.

Personal Loan
If you have good credit and don’t need a ton of cash, you can just take out a personal loan or line of credit from your local bank. If you’ll looking at a $40,000 property and need to put in only $5,000, that means you only need like $15,000. That’s not an unusual amount for a personal loan.

Friends and Family
You could also tap your personal network. Asian communities do this a lot. They pool their money together to help each start business. It’s a great way to finance a business and brings the community closer together.

So think about your own network of friends and family and see if they’ll each chip in a few grand to get your dream of fixing and flipping houses off the ground.

If you do get loans from people you know, make sure you put everything in writing. Just because they are your friends or family doesn’t mean there won’t be miscommunication or different expectations. Make sure it’s all on paper so there is no ambiguity. That way, you all can make a ton of money and not jeopardize your relationships.

Alternative Financing
There are other lending institutions out there that will do fix and flip loans. The mission of the business is to give loans for things like down payments, renovations and real estate expenses.

These lenders are used to working with other real estate investors so they can walk you through applying.

There are huge upsides to having to apply for a fix and flip loan like this is it forces you to think through your business plan. It requires you to do all of the research and due diligence on your investment upfront.

It also requires you to think through the renovation process, how long it will take and how much you can potentially sell the house for when you’re ready to flip it.

Home Equity Line of Credit
Another popular form of funding is getting a home equity line of credit. That means you’re taking the equity from your house and getting a loan backed by it. The huge risk here is that if the project goes south, you may lose your home, so be careful with this option.

The great thing about this option, however, is that you can take as little or as much cash out up to your limit as you need. Plus, you can use the cash on anything. There is no pre-designated amount you have to spend on anything and there are no restrictions on how you spend the cash.

Flipping houses is a great business for those willing to put in the work. And with these financing options, you can use other people’s money and do it with very little risk.

Whether it is to expand a space for your existing business or make an alternative investment, building a commercial property can be a great idea. For Arkansas investors, the total costs that come with planning and building a commercial building can seem daunting. Because of this, one of the best things that you could do would be to take out a commercial construction loan to help financing the development. It is important that you fully understand how commercial construction loans work before originating one.

Why Take Out a Commercial Construction Loan?
Taking out a commercial construction loan is a good idea for anyone that needs to build an new property. A commercial construction loan can be used to cover all aspects of the process. This can include paying for costs to acquire land, soft costs associated with creating plans and getting zoning approval, and all hard costs associated with the labor, materials, and development.

How Funding Works
When you receive a commercial construction loan, you will quickly find out that the loan works much differently than other real estate loans. With a traditional real estate loan, you will receive a loan that will be funded completely at close to purchase the property. With a commercial construction loan, you will only receive a portion of the loan up front. In most situations, you will receive some money to buy the land and reimburse other upfront costs.

After you start building the property, you can continue to draw on the commercial construction loan. Typically, on a monthly basis, you will send the lender receipts and evidence of payment for money that you spent on the property. The commercial construction loan provider will likely also send out an inspecting architect to confirm the progress that you are presenting. The lender will then have a few days to approve the draw, at which point they will fund more money off of the construction loan to you.

While a commercial construction loan comes with more work after the loan is funded, one key advantages is that you can save on interest charges. The lender will only charge interest on the money that has been actually borrowed. Additionally, you can receive an interest reserve that will be used to fund your interest payments each month.

Expenses
When you are looking to take out a commercial construction loan there are a variety of expenses that you can incur. The first expense that you will have is a down payment. The lender will normally want you to have at least 20% equity in the project. Furthermore, the lender will want your money to go in first. This means that if it is a $10 million project, the lender will need to verify that you have spent $2 million up front before they fund any money.

Additionally, there are a lot of expenses that go along with a commercial construction loan. These loans will normally have higher interest rates due to the increased amount of risk. Further, commercial construction loans will have additional fees associated with the loan. This will include third party report fees, inspecting architect fees, loan origination fees, and a variety of other expenses that can add up quickly.

Other Expectations
When you are taking out a commercial construction loan, the lender will also have many other expectations of you. Since constructing a building is a complicated process, they will do a lot of work to make sure that you are experienced in development and have a skilled team. This will likely include doing some work to verify the experience of the contractor and other professionals on your team.

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Our team is available always to help you. Regardless of whether you need advice, or just want to run a scenario by us. We take pride in the fact our team loves working with our clients - and truly cares about their financial and mental wellbeing.

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