One of the best ways to start making money quickly without having to take on a second job is to fix up older or run-down properties and sell them at a profit. However, unless you have tons of cash-on-hand, you’ll need to find a way to finance the purchase of those properties. Luckily, there are several great loan options to help you pay for fixer-uppers. Here are a few of the best ones to consider for your growing property rehab business.
1. Hard Money Loans
When you’re first starting out, taking out traditional business loans isn’t always an option. You need to have tons of capital and proven business history to be an appealing partner for a bank. Hard money loans are issued by a private lender with money they’re willing to invest in your business. These loans are easy to qualify for and you’ll likely be able to get approved in just a few weeks. That said, they tend to have higher interest rates, so make sure you’re comfortable with the repayment terms before you agree to the loan.
2. Cash-Out Refinance
After you’re done fixing your first property, you’ll be able to use the equity you’ve built in the property to finance your next purchase. This is known as a cash-out refinance loan. Before you can use the equity to pay for a new home, you will need to repay the initial loan. However, once you do, there’s no restriction on the type of property you can buy and fix up.
3. Fix and Flip Line of Credit Loans
Lines of credit are great alternatives to traditional loans. Instead of paying interest on the full amount of the loan, you pay interest only on what you spend. You’re free to use the maximum amount of your line of credit, but you don’t have to. Even better, you’re able to spend only what you need, thereby keeping your payments low while you fix the property up for resale.
Which Is Best for You?
Ultimately, choosing a fix and flip loan means looking at your business in detail. If you’re just starting out, a hard money loan may be a better option. However, if you have properties you’ve already rehabbed, you may be better off with a line of credit or a cash-out refinance loan. That said, you may have to stick with the type of loan that you’re reasonably able to qualify for.
Requirements are always changing, but as long as you keep your options open, you’ll be able to get a great loan for your fixer-upper.