House flipping is at an all time high according to industry research. The house market is doing well, and if you have the resources and organizational skills, you can turn a nice profit in a short period. The big hurdle for new flippers is financing. The most common advice for first-timer is a loan from family or friends, but let us look beyond that with six other options you may have at your disposal.
If you come to fixing and flipping with a deep understanding of real estate and/or construction, then you may be able to find a private financing partner. This a person or group who provides financing and other resources and benefits from your expertise in the field. When such relationships are strong, they can encompass multiple projects for even bigger profits.
Line of Credit
If your credit is in order, then a line of credit can be an effective way to finance a house flip. In this case, you may not even need a business plan, which can be a boon if this is your first flip. One common way to achieve such a line of credit is through a home equity loan.
If you have an employer 401(k) loan and have significant retirement savings, then 401(k) financing can be a very effective way to make a fix and flip happen. Due to the nature of such financing, this is generally only available to the older adult who has already built a career and is now seeking additional ways to increase their wealth and expand their retirements savings.
A personal loan from a bank or other financial institution is an option. However, it is worth nothing that traditional bank loans are usually a difficult way to finance house flipping. Nevertheless, if you have good credit and only need a relatively small amount of money, a personal loan can be a great way to cross the finish line.
Seller or owner financing is an intriguing option. In this case, the person who owns the home essentially serves as your lender. In many cases, a homeowner wants to proceeds from a home sale right away. But what if a home is difficult to sell or stands to sell for a lot more with the right repairs? In these cases, seller financing can be a big win for both parties.
The goal with each fix-and-flip project should be to turn a profit in a timely period. Not every project is going to be a big hit, and that is certainly true when just starting out. With those early successes, it is just as important to build your network and make financing easier to acquire in the future.