Talking About Loans and Financing

3 Things To Know About Fixing And Flipping Homes

Fixing up a home and selling it for a profit may seem like a good idea. However, it can be more difficult than you imagine. In order to do this successfully, you have to have enough know-how to purchase a property that will offer a solid profit margin and that will sell quickly. The longer it takes to renovate a home and sell it, the less money you will make. Having enough money to get started is also key. Here are three things to know about fixing and flipping homes.

Hard Money Loans Are a Popular Option

Getting financing for a home that you intend to flip can be more challenging than you expect. If the property you are interested in is in bad shape, you may not be able to get a conventional loan on it in order to purchase and renovate it. If this is the case, a hard money loan may be the best option for a fix and flip loan. The value of the property is taken into account when it comes to these types of loans instead of the borrower's creditworthiness that plays a major role in obtaining conventional loans. However, there is a drawback. While hard money loans are fast, they can be pricey. Interest rates can be up to 10 percentage points higher than for conventional loans.

Other Financing Options Are Available

If a hard money loan is not the best option for you, there are other financing options available. Cash-out refinance loans are a great option if you have an existing property with at least 30 to 40 percent equity. Other options include home equity lines of credit, bridge loans, investment property lines of credit, and even conventional loans. 

It's Important to Factor in Taxes

Another thing to know when it comes to fixing and flipping homes is that it's important to factor in taxes when determining how much money you will make. Short-term capital gains tax rates can range anywhere from 10 to 37 percent depending on what tax bracket you fall into. This will cut into your total profit. It's important to consider this carefully in order to determine whether or not fixing and flipping properties is a worthy investment for you.

When it comes to fixing and flipping homes, there are a few things to know. First, hard money loans are one of the best short term fix and flip loans available. If a hard money loan is not for you, there are other financing options available. If you plan on fixing and flipping, it's important to factor in taxes when determining whether or not it's the right option for you. Talk with a short term fix and flip loan professional for more information.