What Does a Construction Loan Cover?

As with most things to do with real estate, there’s a variety of terms and intricacies you need to know and understand. When you’re purchasing property with a loan it can all get a bit more complicated. This is especially true when you’re entering into the investing world as a prospective fix and flipper. For many first-timers, they assume that what they’ll need for their project is a construction loan - which on the face of it makes total sense. After all, they’ll be purchasing a property and then doing construction - why wouldn’t a construction loan be the appropriate method of funding and what is its purpose if not to fund construction?

First, let’s discuss what a construction loan is.

Basically, they're intended to fund new construction, or construction on properties that require extensive work and much more than a simple renovation - we’re talking complete gut jobs or demolitions. Walnut Street Finance funds these loans in installments, so that as you move through the various phases of your project you have access to the funds that you need without the worry of running through the cash more quickly than anticipated.

There is a lot more to fix and flipping houses other than just going in, making the purchase and walking away with a profit. Download our free eBook to learn the ins and outs of property acquisition & construction so you can get the profit you want.

How to secure a construction loan...

Securing a construction loan from Walnut Street Finance is similar to the process that a borrower would go through for other loan types. We move quickly with our loan process to help get our borrowers the funding they need as soon as possible. We also only require interest-only payments throughout the duration of the loan so that there’s no worries about paying back the full amount prior to the project’s completion. Once the project is complete, however, the loan is paid off when the property is sold, or refinanced with a traditional lender if you intend to hold the property as a rental.

If you’ve still got questions about whether or not a construction loan is the appropriate type of loan for your project, get in touch! We’ve also got a number of resources on our website, including our guide Essential Math for the Fix and Flipper, which you can download and review at your leisure.