Funding for Flipping: Real Estate Investors are Accessing New, Creative Ways to Fund Their Ventures

Chances are, you’re reading this for one of two reasons:

  • You are having a difficult time finding funding for your house flipping idea

  • You anticipate having a difficult time finding funding for your next real estate investment

When it comes to real estate investing, funding is the most difficult part. As if buying a house for your family weren’t hard enough, funding for flipping is even harder.

Why Traditional Funding for Flipping is So Difficult

For most people, buying their first house is quite the ordeal. Buyers ideally have credit scores over 650 and 10%-20% down payment in cash.

But when it comes to asking the bank for a real estate investment mortgage, the stakes grow much higher.

Now banks want to see great credit scores, collateral, larger down payments, and another sizable chunk of cash in the bank afterwards to demonstrate that you can pay your bills until your investment is cash positive.

A number of creative real estate investors are finding ways to get around the hurdles.

For example, “house hacking” is a way to get the banks to play nicer with you as if you were buying a house for yourself. House hacking is simply finding a multi-family unit building and promising the lender that you will live in one of the units yourself. By launching a real estate investment business in this way, you secure modest housing, your first tenants (cash flow), and collateral for future investments.

However, the house hacking example above doesn’t work if the property is in disrepair. For properties that need to be flipped, traditional lenders are only willing to work with you when can guarantee recouping their losses if your venture goes belly-up.

What about securing partners that can provide funding? If you have the right connections and a top-notch business plan, go for it. Even still, finding investors often proves just as difficult (or more so) than getting a traditional loan for your flip.

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The Most Common Solution: Personal Loans

Isn’t this dangerous?

It can be. But isn’t launching your own venture already pretty risky? Absolutely, it is.

Truth is, most real estate investors do this, even if they don’t talk about it. These personal loans frequently take the form of unsecured loans: loans not backed by collateral.

One such company, Premier Access Consulting, specializes in helping franchise owners and house flippers get the unsecured funding they need to move forward.

Applicants with high credit scores and significant, verifiable income can often secure interest rates as low as 7%. In the business funding world, this is excellent.

Many successful house flippers can tell you that taking the personal, unsecured loan route is your best choice because it’s your only choice. Your first flip means you probably have no collateral. That shouldn’t stop you.

For seasoned house flippers, they may be maxed out leveraging their collateral but still needing to move quickly to secure the best real estate investment opportunities.

Credit Cards are Best Way to Use Personal Loans for Flipping

Think about your business timeline for a second.

You have the initial purchase, followed by a renovation period, followed by listing the flipped property, and finally you sell the property for a handsome return on investment.

How long does that take? That’s the hard part.

You hope that you can get the property you want before someone else gets it first.

And you hope that renovation takes no more than 2 months. But if something unexpected happens, you might be looking at longer.

How long will it take to sell the property? Some say a month or two. Most say 6 months.

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Realistically, you could be looking at paying on a personal loan for up to a year before you get your money back plus some. All that time, interest is accruing and lowers your return on investment.

Thankfully, more and more banks are enlarging their loophole to offering prime lending to people without collateral. Credit card offers begin at 0% interest for 6 months and go as long as 0% for 18 months. This is where specialists from Premier Access Consulting come in.

Credit cards are lines of credit, meaning that you use only what you need and pay on only what you use.

Additionally, credit cards are unsecured. So you don’t need collateral to get them: all you need is a decent credit score.

And finally, once the 0% interest period ends, there’s no backpay. Interest often go up to 11%-20% after the introductory period, but that is not always the case if you negotiate with lenders. What’s more is that even at the best possible interest rate on a traditional mortgage, you are still saving thousands of dollars in interest during that 6-18 month interest-free period.

Many house flippers are able to complete renovations and sell the property before the 0% introductory interest rates adjust. And when you pay off all your credit card debt, lenders are going to want to negotiate with you for larger credit lines at lower interest rates.

Usually, you need more than one bank-issued credit card to do this safely. Consider working with a professional unsecured lending specialist to help you find only the 0% interest rates for as much funding as possible.