The residential buy, fix and sell business is popular and sexy again with demand and prices back on the up-swing in most markets.
We are getting more calls from lenders eager to lend out money to house flippers than ever before. Usually when the money becomes easier and more available, newer developers try their hand at a flip or two.
A lot of real estate funds that were previously buying up properties are now lending to small single family real estate re-developers. When you think about it that’s funny. Just like the big funds, individual real estate investors rehab properties for a profit, buy rentals, sell them off, and build a pot of investment capital. As they grow older and wealthier they grow tired of flipping and rentals. Many successful real estate investors transition into private lending.
So how do you get a loan to flip a house? You find one of these private lenders that understand real estate and what you are trying to do. You can also find people that have funds in CD’s and 401K’s and teach them about what you do and how they can invest. This is a lot more work but can save you money on the interest rates and points.
How do you find private lenders open to lending you money?
Public records research
Real estate investment club meetings. Your local real estate club can be a great place to meet people who lend money, but do not advertise they are a lender.
Through a hard money broker. If you are too busy this is one of the easiest ways to get a loan. A good private broker will have a large list of lenders and will likely be able to get you approved on the spot.
Direct mail. Think of the tactics investment advisers use to market to folks in the right demographic who you could teach about private lending.
The key someone approving and closing a loan is you finding a profitable deal to purchase. Private lenders need to feel comfortable you will be able to sell and make a profit so you can pay back the loan. A win-win.
This has always been my strategy – mentioning a few details about a deal I am working on and that their is a good return being offered with a low loan to value. Just don’t be pushy.
Here are some items you should have ready for your lender.
Property details – a summary of repairs needed and it’s present condition.
Photos of the property
Your financial statement – professional lenders will have you fill out a loan application
Last 3 months of bank statements
If you have experience provide details about your previous flips.
It’s not too difficult, talk to a few lenders, listen carefully, they will tell you what kind of deals they like to fund. Find one that meets their lending parameters. Send them the paperwork they ask for.
