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Hard Money Lender Investors

The Ultimate Cheat Sheet for Acquiring Fix and Flip Financing from Hard Money Lenders

Posted by Ken Meyer on Tue, Jun 30, 2015

trust deed investorsMany advertisements from lenders make it sound simple to get into the fix and flip business. All you have to do is (a) find a fixer-upper, (b) buy it cheap, (c) fix it up quick, and (d) sell it fast for a great profit, right? Well, experienced real estate investors know there is a lot of ground between (a) and (d). There is an art, as well as a lot of work that goes into a successful fix and flip. Understanding what makes an ideal fix and flip house and then finding it isn't always easy. A borrower needs to do a good deal of research and get the right financing for the best deal.

While lenders may differ on their requirements, there are some basic factors, which most use to make their final decisions. In order to apply for a loan to finance a fix and flip project, borrowers can refer to a basic check list for help.

The Ultimate Cheat Sheet for acquiring Fix and Flip Financing:

1. Find the Right House

Everything depends on this first and hardest step. To keep it simple, remember the prime real estate motto, "Location, location, location!" The ideal house for a fix-and-flip must be salable once it's fixed up! Once you identify a potential house, the "foundation" work begins.

  • First, do a search for sales and prices of comparable houses sold in the location area in the past year. This will establish the ARV or the After Repair Value of the "flip" house. This figure serves as the basis for the loan amount and negotiating the property purchase price.

  • Gather information about the neighborhood which may affect the ARV. These facts could include neighborhood schools, housing associations, deed and/or zoning restrictions, upcoming construction and nearby shopping areas.

  • Visit the house and give it a thorough inspection inside and out. Take both interior and external pictures of anything requiring repair or remodeling. Be sure to include landscaping for curb appeal.

2. Get an Estimate on the Repairs

Even though you may be able to guesstimate the amount of money required to fix-up a house, get at least three written estimates of any and all required work needed to bring it up to par with the neighborhood. Determine any necessary structural repairs, including foundation work and roofing. Structural repairs will be the top dollar items. Consider potential updates to the kitchen and bathrooms.

  • Check to see if the title is clear, then negotiate the asking price for the house. See if a cash offer will lower the price. Calculate the asking price against the potential market value. If it is over 70%, back away.

  • Calculate the total expenses: purchase price, estimated fix-up costs, insurance coverage, and loan fees. Add another 20% for unexpected costs. Finally, compare this total to the market value or potential sale price. If there is a profit to be made, contact us to discuss financing.

When presented with the information above, we can follow-up on the findings and supply expert advice on the project. We can negotiate the best loan and partner with you throughout the process to assist in a successful outcome for all.

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