What are your best ways to Fix and Flip or Rehab?

Question

Are you looking for the best way to finance your next real estate deal? 🤔 Whether you’re building from the ground up, flipping properties, or expanding your rental portfolio, finding the right funding is key to success.

What financing strategies have worked best for you? Have you explored options like Fix & Flip, Buy & Hold, or Bridge Loans? Let’s share insights on securing fast approvals, flexible terms, and maximizing investment returns!

Drop your thoughts below—what’s been your biggest challenge in real estate financing? Let’s discuss!

John McDonald · Answer

There's a ton of options available but it often comes down to available resources and the goals of the investor.1) A HELOC on your home or existing properties in your portfolio. 2) If you have a solid banking relationship, you could secure a line of credit.3) If you have relationships with high net worth individuals, you could secure financing by setting up an investment vehicle that allows you to share profits while you scale.It's important to secure a strong relationship with bankers. As you become more successful it becomes much easier to secure larger loans with better terms. Here's a quick break down of the various options available:

Traditional Financing

1. Conventional Mortgage

• Similar to a regular home loan but with stricter requirements.
• Usually 20–25% down payment.
• Requires good credit (typically 680+).
• Lower interest rates, long-term (15–30 years).

Similar to a regular home loan but with stricter requirements.

Usually 20–25% down payment.

Requires good credit (typically 680+).

Lower interest rates, long-term (15–30 years).

2. Portfolio Loans

• Offered by small/local banks.
• More flexible underwriting (good for investors with multiple properties).
• Often allow creative deal structures or slightly riskier properties.

Offered by small/local banks.

More flexible underwriting (good for investors with multiple properties).

Often allow creative deal structures or slightly riskier properties.

Government-Backed Loans

• FHA Loans: Can be used if you plan to live in one unit of a multi-family (up to 4 units).
• VA Loans: For veterans; same as above, must live in one unit.

FHA Loans: Can be used if you plan to live in one unit of a multi-family (up to 4 units).

VA Loans: For veterans; same as above, must live in one unit.

Private & Alternative Financing

3. Hard Money Loans

• Short-term, asset-based loans from private lenders.
• Higher interest (8–15%), high fees, but fast and less credit-focused.
• Great for flips or short-term holds.

Short-term, asset-based loans from private lenders.

Higher interest (8–15%), high fees, but fast and less credit-focused.

Great for flips or short-term holds.

4. DSCR Loans (Debt-Service Coverage Ratio)

• For rental properties, approval based on rental income, not personal income.
• Lower down payments (~20–25%).
• Ideal for buy-and-hold investors scaling up.

For rental properties, approval based on rental income, not personal income.

Lower down payments (~20–25%).

Ideal for buy-and-hold investors scaling up.

5. Commercial Loans

• For 5+ unit properties.
• Based on property’s income and cap rate.
• Often balloon-style with 5–10 year terms and 20–25 year amortization.

For 5+ unit properties.

Based on property’s income and cap rate.

Often balloon-style with 5–10 year terms and 20–25 year amortization.

Creative & Seller Financing

6. Seller Financing

• Owner acts as the lender.
• Negotiable terms.
• Great if the seller owns the property free and clear.

Owner acts as the lender.

Negotiable terms.

Great if the seller owns the property free and clear.

7. Subject-To (the existing mortgage)

• You take over the existing mortgage payments.
• Requires trust from the seller but low or no money down.

You take over the existing mortgage payments.

Requires trust from the seller but low or no money down.

8. Lease Option or Rent-to-Own

• Rent with the option to buy later, can be a good entry point.

Rent with the option to buy later, can be a good entry point.

Other Options

9. HELOC / Cash-Out Refinance

• Tap into equity from your primary residence to invest.
• HELOC is flexible; refinance gives a lump sum.

Tap into equity from your primary residence to invest.

HELOC is flexible; refinance gives a lump sum.

10. Partnerships / Joint Ventures

• Partner with someone who has money or credit.
• You bring the deal, they bring the funds.

Partner with someone who has money or credit.

You bring the deal, they bring the funds.

Using Retirement Funds

11. Self-Directed IRA or Solo 401(k)

• Can invest in real estate directly.
• Must follow strict IRS rules (no personal use, etc.).
•

Can invest in real estate directly.

Must follow strict IRS rules (no personal use, etc.).

I hope this is helpful. Good luck with your investing journey.