The Three Best Loan Types for Fixing and Flipping Homes

In obtaining new homes, there are various types of loans available. Through these loans, real estate investors can purchase properties, improve them, and then sell them for a profit—a process commonly referred to as house flipping or fix-and-flipping.

What Is a Fix-And-Flip?

Fix-and-flip is a way of making money from real estate. This involves buying a property, fixing it up and changing its appearance, and then reselling it at a higher price. Repeating this process a few times is sometimes referred to as “flipping” houses.

There are several ways to go about fix-and-flip. For example, an investor can purchase and fix up a house and then resell the property. If the home is sold at a higher price, the investor makes a profit.

Another way to flip houses is by purchasing a property and selling it. However, this approach is sometimes considered less desirable because the investor must pay real estate fees while they are holding the property and taxes on the property while they own it.

How Much Does Flipping a House Cost?

There are many costs that an investor will incur when they are flipping a house. Some of these costs include:

• The cost of the property
• Paying for fixes and renovations
• Property taxes
• Real estate agent commissions
• Legal fees

What Type of Loan Should You Get for a Fix-And-Flip Home?

There are specific loans that are commonly used to purchase properties. Here are some of them.

1. Personal Loans. These loans are obtained directly from banks or other financial institutions. Personal loans are often the cheapest and most flexible of the loans available. Because of this, they are often used to purchase real estate. Personal loans typically have a lower interest rate than other loans.
2. 401K Financing. There are loans available from a 401K account. These loans allow an investor to borrow from their 401K account to use for fixing and flipping a home. However, there are certain limitations placed on the loans. For example, you can only borrow up to 50% of the value of the 401K. If you do not pay the loan back in time, the loan is considered a distribution, which is taxable and will incur a 10% early withdrawal penalty.
3. Hard Money Loans. Also known as private money loans, these loans are obtained from a private individual or a company. Hard money loans are more expensive than other types of loans. The interest rates on hard money loans are typically higher than other loans. However, if an investor is looking for a loan quickly, a hard money loan may be the answer.

How Do You Find the Best Financing Partner?

If you are looking for a loan to purchase and flip a home, you should first talk to local banks, lenders, and real estate agents. They know who the best people to work with are.

In addition, you will want to make sure that you are getting the best deal possible on your home mortgage or loan. You can do this by getting free real estate financing quotes. You can do this by getting quotes from competing lenders.

Oak Lawn Mortgage Lender: MidAmerica Bancorp, Inc.

When you are flipping houses as a real estate investor, you need to be aware of the different types of loans that are available for you to use. By doing this, you can make sure that you get the best deal possible.

Are you planning to make a fix-and-flip housing loan? Check out the options we have at MidAmerica Bancorp, Inc. MidAmerica Bancorp, Inc. is licensed in multiple states: Illinois, Indiana, Florida, Michigan and Wisconsin, and we have designed a specialized loan for fix-and-flip projects. Give us a call today at (708) 237-4050 to further discuss your options.