When the housing market started recovering after the Great Recession, fixing and flipping homes became a popular way for motivated investors to reap impressive returns in a short period of time.
With the number of distressed properties on the market, savvy investors could buy fixer-uppers at steep discounts, spend a few months implementing some cost-effective repairs, and sell the property at an incredible profit.
Although people have been fixing and flipping homes across America for several years now, there are still plenty of opportunities to profit from distress properties for those who know how to identify and repair the right properties.
Where To Get Capital
The problem with fixing and flipping, of course, has always been access to capital, or a lack thereof. With the strict lending standards that accompany most traditional bank loans now, it is harder than ever to get the capital you need to begin fixing and flipping homes.
These days, if you don’t have an immaculate credit score, your best bet for getting the capital you need for a fix and flip project is a hard money loan. Hard money lenders generally don’t require a great credit score, instead focusing on other factors.
First, to qualify for a hard money loan, you’ll need some skin in the game yourself. Because of the risk involved in hard money loans, lenders will only provide about 70% of the cost of the total project. You’ll need to supply the remaining 30% yourself.
Second, you’ll need to draw up a plan that details your plans and timeline for repairing the property to ensure that the project will be profitable. Hard money loans for rehabilitation projects are generally short term loans, so you’ll need a plan that shows a relatively quick return on investment.
Third, hard money loans are going to have higher interest rates than the loans you can get from traditional banks. There’s no way around it, because hard money loans are simply riskier than traditional bank loans. But ideally, if you stick to your timeline and get your house flipped quickly, you can minimize the effect of these higher interest rates by paying off the loans after a few months.
Lastly, a benefit of hard money loans is that you can get access to the capital you need quickly. NLDS Corp. can approve hard money loans the same day, and close on the loans usually within 7 days.