Common Methods to Get Fix and Flip Funding: A Broker’s Guide

Fix-and-flip ventures can be extremely profitable, but getting the proper financing is usually the most significant challenge for investors. As a broker, you are a key part of assisting your clients in understanding the financing process and determining the most suitable solution for their requirements. Whether they're experienced flippers or beginners, knowing the typical ways to obtain a fix and flip funding can be the difference between success and failure.

In this blog, we will break down the most sought-after funding sources for fix-and-flip projects and how you can lead your clients to the correct one. From hard money loans to peer-to-peer lending, we've got you covered.

Why Fix-and-Flip Funding Matters

Fix-and-flip deals involve a lot of initial capital for the acquisition and rehabilitation of a property. Without proper financing, even the best deals can go sour. Here's why brokers must know the financing alternatives:

• Seizing Opportunities: Quick access to funding allows your clients to act fast on time-sensitive deals.
• Maximizing Profits: The right financing can reduce costs and increase ROI.
• Building Trust: Helping clients secure funding positions you as a trusted advisor.

By becoming an expert in the nuances of fix-and-flip financing, you can bring tremendous value to your client's investment experience.

1. Home Equity Line of Credit (HELOC) or Home Equity Loan

A Home Equity Line of Credit (HELOC) or Home Equity Loan allows your clients to tap into the equity in their primary residence to fund their fix-and-flip project.

How It Works:

• HELOC: Works like a credit card, providing a revolving line of credit.
• Home Equity Loan: Provides a lump sum upfront, repaid in fixed monthly installments.

Pros:

• Low Interest Rates: HELOCs and home equity loans typically have lower rates than other financing options.
• Flexibility: HELOCs allow clients to borrow only what they need when they need it.

Cons:

• Risk of Foreclosure: If your client defaults, they could lose their primary residence.
• Limited Equity: Not all clients have enough equity in their homes to fund a flip.

How Brokers Can Help:

• Help clients calculate the equity in their home and determine if this is a viable option.
• Educate clients on the risks and benefits of using home equity for funding.

2. Hard Money Loans

Hard money loans are a popular choice for fix-and-flip projects due to their speed and flexibility.

How It Works:

• Short-term loans (6–12 months) secured by the property itself.
• Funds are typically disbursed within 7–10 days.

Pros:

• Fast Approval: Ideal for time-sensitive deals.
• Flexible Terms: Less emphasis on credit score and more on the property’s potential.

Cons:

• Higher Interest Rates: Rates typically range from 10% to 15%.
• Short-Term: Requires a clear exit strategy, such as selling the property or refinancing.

How Brokers Can Help:

• Partner with lenders like RCN Capital to offer competitive hard money loans.
• Help clients create a realistic repayment plan.

3. Personal Loans

Personal loans can be a straightforward option for clients who need partial funding for their fix-and-flip project.

How It Works:

• Unsecured loans based on the borrower’s creditworthiness.
• Funds can be used for renovations or other project costs.

Pros:

• Flexibility: Can be used for a variety of expenses.
• Quick Access: Funds can be disbursed quickly.

Cons:

• Higher Interest Rates: Average rates are 2-3% higher than the standard 30-year mortgage rate.
• Limited Amounts: Loan amounts may not be sufficient for larger projects.

How Brokers Can Help:

• Assess clients’ creditworthiness and recommend personal loans if appropriate.
• Highlight the pros and cons of using personal loans for fix-and-flip funding.

4. Peer-to-Peer Lending (Crowdfunding)

Peer-to-peer lending, or crowdfunding, enables clients to gather funds from several investors to fund their projects.

How It Works:

• Clients pitch their projects on an online platform.
• Investors contribute funds in exchange for a return on their investment.

Pros:

• Access to Capital: Can provide funding for clients who don’t qualify for traditional loans.
• Flexibility: Terms can be tailored to the project’s needs.

Cons:

• High Interest Rates: Rates can be as high as 12%.
• Fees: Platforms may charge origination fees.

How Brokers Can Help:

• Help clients create a compelling pitch for their project.
• Recommend reputable crowdfunding platforms.

Obtaining the proper funding is essential for the success of any fix-and-flip venture. Knowing the most common ways to obtain a fix and flip funding, you can assist your clients in making informed, profitable choices.

Why Brokers Should Partner With RCN Capital

At RCN Capital, we know the special needs of real estate investors—and the brokers that serve them. Here's why brokers prefer to work with us:

• Flexible Programs: From fix-and-flip financing to long-term rental funding, we provide solutions to suit your client's requirements.
• Fast Closings: We can close loans in as few as 10 business days, helping your clients move quickly on opportunities.
• Broker-Friendly: We value our relationships with brokers and offer competitive commissions, fast approvals, and dedicated support.

By partnering with RCN Capital, you can provide your clients with the financing solutions they need to succeed in the competitive world of real estate investing.

Ready to take your brokerage to the next level? Connect with us today to discuss our real estate financing solutions and how we can help you grow your business.