Okay, so you’ve found the flip of your dreams and have calculated the expenses and profit, now you have to figure out how to pay for it. If cash is not an option, there are a few other ways that you can purchase an investment property that will still make the deal profitable to you.
Hard Money Lending
Hard money loans are made by private investors that lend you money, usually at a higher interest rate, based on your assets. There are several pros to hard money loans, one of which includes a fast turnover. Most investment properties that come on the market are extremely competitive. The last flip we bet on had 11 offers! If you cannot offer a quick close to the seller, they may not even consider your offer no matter what you’re willing to pay for the property. Several hard money lenders can disburse funds within days of approval ensuring that your offer is competitive on the flip and giving you a better chance of winning that deal! Although hard money loans often have higher interest rates, if you plan the timeline accordingly, you should only have the loan from the time you purchase the flip, renovate it, and when the flip is sold, so a handful of months.
Another route you can go is to purchase the flip as a second investment property with a conventional loan. Since the home is an investment and will not be your primary residence, you will be required to put more money down than a typical home purchase and the interest rate will be higher than your average loan. Conventional loans are also harder to qualify for than hard money loans.
Another thing to keep in mind is that a conventional loan will take about 30 days, sometimes longer, to underwrite – meaning it could take 30 days from the day you go under contract until the home is in your possession. Other than that, this is usually a great option because there is less risk involved than hard money lending.
These are just a few ways to purchase an investment property, but we’ve seen people get pretty creative! If you have any questions on the financing side of things or would like a referral to a reputable hard money lender or a conventional mortgage advisor, let us know! We have some great recommendations for the best in the biz that have helped us along the way.