Rhode Island Fix and Flip Loans
House flipping has become one of the most popular forms of investing in the past several years. Due to highly watched reality shows and explosion of real estate guru’s advocating and promoting this type of business, many more investors have come into the fray.
The latest data shows that you can make an average of $68,000 on a flip. That’s really good money! If you do 2-3 a year on a side, you’re making a really decent living.
Rhode Island is getting involved in the action as well. This state has a plethora of older homes and areas being gentrified that is ripe for an investor to come in, buy, fix and flip for a huge return.
One of the barriers to flipping, however, is getting that initial round of cash to put down on a mortgage and to renovate the home. Here are just a few ways you can find funding in Rhode Island to get fix and flip loans.
By the way, before you go after these funding sources, make sure you have a deal in hand. Do the research and planning beforehand so you have a specific project you can pitch to the potential lender.
The plan should include address of the property, information about the neighborhood, sales price, timeline for renovation, expected sales price and a backup plan in case the renovations go sideways for some reason.
Get detailed on the renovation plan. Everyone who has ever done a project like this knows that it can easily go out of control. Show your investors and lenders you’re seriously by being realistic about your renovation plans.
Home Equity Line of Credit
The home equity line of credit, also called a HELOC, can be a great first source of funding. This is where you take the equity in your current home and use it as collateral for a line of credit.
Essentially, you’re taking a personal loan out using your current equity in your primary residence.
One of the great advantages to this type of loan is that the bank doesn’t really care how you spend the cash. It’s a simple and straightforward loan.
You can spend whatever portion of that line of credit for a down payment on a mortgage for the home you are flipping. By the way, most lenders require a 20-45% down payment for investment properties.
You can also use your own discretion on how much of it you use for renovating your home. There are no restrictions for using your HELOC.
You don’t even have to spend all of it if you don’t want. You don’t have to borrow up to the limit. You spend as you go like a credit card.
If you don’t have enough equity in your home to get a HELOC and the bank won’t lend you money for real estate investments, you can find alternative financing solutions.
There are companies out there like Delancey Street that will loan you money for projects like fix and flips.
They don’t just do loans for real estate, but a big chunk of their business comes from flippers.
Business Loan from Investors
You can also find independently wealthy individuals to invest in your fixer uppers too. There are qualified investors out there with a high net worth looking for investment opportunities.
They have risk capital to put toward projects like fix and flips, but they don’t want to do the actual work of finding deals, evaluating it, fixing it up and selling the property.
As you can imagine, flipping houses is a lot of work, and there are very wealthy people out there with the cash, but no desire for the work.
You can either get a simple straightforward loan from them with a static interest rate and pay back date. You can also get them to share the risk with you by taking a percentage of your profits.
Finding capital is not hard for flipping projects. Flipping houses is one of the more simple investment businesses out there. And once you have flipped a few houses for profit, not only will you have proceeds from those sales to put toward your next project, but capital will be attracted to you since you’ve proven yourself in the market.