Updated: Jun 15
Everything You Need to Know About Fix and Flip Loans
Fix and Flip Loans are acquired by real estate investors to buy a cheap or rundown house and fix it up to sell it again for a profit. Investors interested in renovation buy low and sell high, on a fast and furious timeline and budget.
These residential Fix and Flip Loans are a bridge loan. Investors may opt for these types of loans because they require less underwriting than traditional loans. To acquire a Fix and Flip Loan, an investor must prove that the subject property is profitable. Generally, there is no penalty for paying off a Fix and Flip Loan early, so investors can move on to other dreams and other properties in which to invest.
Keep reading to find out everything you need to know about Stratton Equities' Fix and Flip Loans.
Steps to Acquire a Fix and Flip Loan
There are several easy steps to acquire a Fix and Flip Loan with Stratton Equities, and our Loan Officers will be with you every step of the way.
During the pre-approval stage, a Stratton Equities Loan Officer will evaluate whether the project fits our lending criteria, assessing where the flip property is located, what the prospective price is, the rehab, and proof of funds. We will also evaluate customer information, such as previous experience, credit, and financial background.
The processing and underwriting stage analyzes both the property's value and the customer's banking and buying history. If the numbers work, the customer will move on to the funding stage.
The funding stage consists of paperwork and promissory notes to sign before the funds are released. Once everything is completed to the underwriter and closing agent's satisfaction, the allocation of funds will be disbursed to the seller of the property or directly to the borrower.
During a Fix and Flip Loan, Stratton Equities will develop a Draw Schedule with the borrower to be utilized for the construction funds part of the requested loan. Throughout this period, an inspector will confirm things are done to code, and Stratton Equities will release the remaining portion of the draw. Once all parties have approved the Draw Schedule, each payment installation will be transferred to the borrower or entity's bank account after completion of each inspection. Transferring of funds to the designated bank account typically occurs 2-3 days after the draw request.
Keep in mind; there are four specific areas where an investor requires money for a Fix and Flip Rehab Loan: the down payment, closing costs, reserves, and first draw.
Is a Fix and Flip Loan the Same as a Hard Money Loan?
No, a Fix and Flip Loan is not the same as a Hard Money Loan. Hard Money Loans are based on the LTV (Loan to Value) of the asset. With less underwriting and fewer restrictions, Hard Money Loans rarely go beyond 65% of the value. On the other hand, Stratton Equities' Fix and Flip Loans will lend up to 90% of the purchase price, 100% of the rehab costs, and 75% ARV with experienced real estate investors.
These loans are similar in that they both use private hedge fund monies to finance a property, but there are still substantial differences. Fix and Flip Loans generally have a minimum FICO requirement and more stringent restrictions. Fix and Flip Loans also look at the property AND the borrower, while Hard Money Loans are primarily concerned with the property. Hard Money Loans may not offer as much money, but they will be easier to acquire.
Benefits of a Fix and Flip Loan
Why get a Fix and Flip Loan when there are so many other types of loans? There are certain benefits to consider. A Fix and Flip Loan requires less paperwork, so you will have fewer hoops to jump through. If you have a residential fix and flip on your mind, consult the experts at Stratton Equities for our competitive rates and short timeline from application to closing. You can receive up to 90% of the house's cost and 100% of the rehab costs, so you will be able to turn the property around and re-invest. To build and diversify your investment portfolio, a Fix and Flip Loan could be a great move.
With rates starting at 7.25%-9.99%, it's clear to see why Stratton Equities' Fix and Flip Loan programs are a natural choice for ambitious real estate investors. If you have the time and desire to fix and flip a house, call Stratton Equities at 800-962-6613, email us, or apply for loan pre-qualification today.