There aren’t many great investment opportunities for average investors to make a high return. Most high return hedge funds require a high net worth. There is, however, a simple way to make large returns for non-qualified investors. It takes a bit of elbow grease, but it can create very large returns.
That investment opportunity is flipping houses. Flipping real estate has become one of the best ways for average people to make a great return on investment in recent years. That is because just about anyone can get into it. You just need some startup cash, but if you find a good deal in a good location, it can turn out to be a great investment that pays off big even in the short term.
Montana is a state with a growing population. That means the demand for housing will only grow. The great thing about real estate is that even when the stock market crashes and bond prices fall, people still need some place to live.
Even if you don’t have the cash, you can get a fix and flip loan to cover your down payment and renovation costs. Here is what you need that money for and a few ways you can do that.
You need to start off with some cash. You’ll need at least 20-40% of the purchase price as a down payment for your lender. The down payment for investment property is higher because the risk for the lender is higher. In short, if you’re not living in the house you’re buying, the bank knows you have less skin in the game. So they force the skin by asking for more money down up front.
You’ll also need the cash to do the renovations. Depending on how run-down the house is, you may need a little or a lot. Make sure to have plenty of buffer because you have no idea what you’ll find once you start digging into the house. Renovation costs can easily balloon out of control.
How To Find Fix and Flip Loans
Here are a few most common ways to get fix and flip loans for your next real estate investment.
Friends and Family
Here in Montana, one of the best ways to get a loan is through friends and family. First, start with a budget that will tell you how much you’ll need. Then add 20% just for a buffer. Then start shopping it around to your network.
Even though they are friends and family, presumably people you know and trust, make sure you get everything in writing. Write down how much they are lending you, at what interest, and by what time. Sometimes details can be lost in communication and in the enthusiasm of an exciting new opportunity.
There are may financing partners out there looking to lend money for specific projects and opportunities like this. Companies like Delancey Street will provide loans for narrowly scoped projects like a flip.
These types of lenders are great because they work with entrepreneurs every day, evaluating opportunities from all over the country. You can leverage their expertise to validate your investment idea or even offer insights into your strategy.
In other words, if a lender turns down a flip and fix loan for you, why? Maybe they have a good reason that you didn’t see. Maybe you have a blind spot that would’ve ended up in a bad investment. Lenders can be a great source of validation and caution.
Home Equity Line of Credit
Also called a HELOC, you can take a loan backed by the equity in the house you’re currently living in. If it’s a good investment opportunity, you’d be able to pay it back within a year.
Also, instead of paying back the entire loan, you can use the proceeds from that investment for your next project!
Montana has a great inventory of houses that are ripe for fixing and flipping. If you can find the deals, finding the cash to get started isn’t too difficult. The best part of it all is that any average person can do it. You don’t have to be mega wealthy for this great investment opportunity.