House Flipping Financing

[JOHN HERRON]

Hello everyone, I would like to know what the smartest way to fund a flip. As in what type of loans are most commonly used to purchase flips, thank you, John.

[Mike Burkett]

@JOHN HERRON John where are you located? There are several ways. Cash is the simplest. Borrowing from friends and family is fairly common. If your local banker will make you a loan and you have plenty of time for the approval process that is a good way as well. For folks that don't have friends, family, cash, or a willing banker, there are substantial numbers of lenders willing to lend you funds for a flip deal. It is not as cheap as the alternatives, but it may be your best bet. Most lenders will lend you 80%-90% of the purchase price at closing plus the will hold in escrow up to 100% of the rehab funds and release those funds to you as you complete the restoration and provide them with invoices. Interest rates vary from 10%-13% annually. Origination fees are 2%-3% of the loan amount. Total loan would be limited to 70% of the ARV. There will probably be other lender fees and title fees charged at closing. It is not the cheapest way to to go, but if you need to get a deal closed in less than 10 days, it may be your only choice. Let me know if you would like additional details.