Everything Brokers Need to Know About Fix & Flip Financing

There are more and more investors getting into the business of home flipping in today’s market environment. With interest rates so high, rental property investing is becoming more difficult to justify, but a fix & flip project remains as appealing as ever. A smart investor can generate significant returns in a short amount of time, and for new investors flipping can be the perfect launchpad into other, larger investments. Securing financing for a fix & flip is a different story, since banks may not be willing to risk lending on a neglected property.

That’s where you come in. If you want to be able to help your clients toward the best loan options, you should read up on the ins and outs of fix and flip financing to build stronger, more profitable connections with clients. In this blog, we'll break down everything you need to finance fix and flip projects so that you can help your clients succeed while also growing your business.

Why Fix & Flip Financing is Different

Unlike the type of traditional real estate investments, fix and flip projects have their unique challenges. Banks often hesitate to lend on properties in need of rehab, and their long-term mortgage structures don't fit in with flippers short-term needs. Hence, it becomes important to look for other financing options that are exclusively associated with fix and flip investors.

Here’s a quick overview of the key factors to consider when helping your clients secure financing:

• Loan Period: Short-term loans are quite perfect since fixing and flipping typically takes between 6-12 months
• Interest Rates: While rates may be higher than traditional mortgages, the short loan term keeps overall costs manageable.
• Speed of Funding: Time is money to flippers. Find the lenders who can close in as little as 10-14 days.
• Renovation Funds: Ensure that the loan covers the purchase price and renovation costs. 

Now, let us look at the financing options available and how you can assist your clients in selecting the most appropriate one to meet their requirements. 

1. Private Lenders: Flexibility and Speed

In simple terms, private lender would be an individual or non-bank organization that offers credit to borrowers other than that which comes from mainstream banks. They are a great option for doing fixes and flips because they allow flexibility with regard to the time of approval without requiring too much documentation. 

Why Brokers Love Private Lenders:

• Flexible Terms: Private lenders are often willing to negotiate loan terms, making it easier to tailor financing to your client’s specific project.
• Fast Funding: With fewer hoops to jump through, private lenders can often fund loans in as little as 2 weeks.
• Credit Flexibility: Clients with less-than-perfect credit may still qualify, as private lenders focus more on the property’s potential than the borrower’s credit score.

How Brokers Can Help:

• Connect your clients with trusted private lenders from your network. 
• Highlight the advantages of private lending like speed and flexibility with the clients who need to access funds immediately.

2. Hard Money Loans: The Go-To for Fix & Flip Investors

Hard money loans are the most common means by which flippers fund their projects, as all flipper loans are security loans. Thus, it shows that lenders need not be hesitant in approving fast loans with flexible terms. 

Why Hard Money Loans Work for Fix & Flip:

• Fast Approval: Loans may close in as little as 10-14 days course your clients to act on opportunities without delay. 
• Renovation Funds: Most hard money lenders grant funds for both the purchase and renovation of the property.
• Short-Term Focus: The loan terms at hard money lenders exactly correspond to the tasks concerning fix and flip since hard money loans take up a term of approximately 6-12 months. 

How Brokers Can Help:

• Partner with hard money lenders, such as RCN Capital, to provide competitive loan options for your clients.
• Inform your clients of the benefits of hard money loans such as speed and flexibility. 

3. Traditional Bank Loans: Pros and Cons

Traditional bank loans, while generally having lower interest rates, will not apply to every case of fix-and-flip projects. 

Pros:

• Low Interest Rates: Banks usually offer the lowest rates to be found.
• Down Payment Assistance: On occasion, certain programs will help qualified borrowers. 

Cons:

• Strict Property Criteria: Distressed properties are great examples of properties that banks will avoid flipping.
• Long Approval Process: Securing a bank loan can take weeks or even months. 
• No Renovation Funds: Traditional loans do not typically include renovation costs. 

How Brokers Can Help:

• Use a traditional loan as an option for clients with really good credit and less-urgent projects. 
• Combine traditional loans with other financing methods to pay for renovation expenses.

4. Home Equity Loans and Lines of Credit (HELOCs)

Home equity loans or HELOCs are some good options for clients who already have a house. 

Pros:

• Low Interest Rates: HELOCs usually come with attractive rates. 
• Flexible Use: Money from the HELOC can be used to purchase and renovate the flip property. 

Cons:

• Risk of Losing Property: If the project fails, your client can lose their primary residence.
• Equity Requirements: Clients need several significant equity in the existing property to secure a loan. 

How Brokers Can Help:

• Suggest HELOCs for clients who have a good amount of equity in their homes and for projects that are of low risk. 
• Stress the need for due diligence to reduce risks.

5. Government Loans and Programs

Government-backed loans, on the other hand, may provide some solutions for certain fix-and-flip projects, but they're not very common.

FHA 203(k) Loans:

• Renovation Funds: This one will grant you up to $35,000 in renovation costs. 
• Low Interest Rates: Government-backed loans offer competitive rates.

Down Payment Assistance Programs:

• Help for First-Time Investors: New investors could benefit from programs assisting with down payments.

How Brokers Can Help:

• Explore the government programs for clients intending to reside in the property for a minimum of a year. 
• Explain the benefit of low-interest financing for qualifying clients. 

Tips for Brokers

You, as a broker, stand by your clients until they receive the loan. Here are some tips to keep your clients financing their fix-and-flip projects: 

1. Create a Solid Business Plan: Urge your clients to put together a comprehensive renovation plan together with a budget. This shows the lenders they are prepared, and it also increases their chances of approval.
2. Compare Lenders: Guide your clients in comparing loan terms, interest rates, and timing for funding to best suit their needs. 
3. Leverage Your Network: Work with trusted lenders like RCN Capital, and make great loan options available for your clients.
4. Educate Your Clients: The more you share your expertise on financing fix and flips, the more your clients will be able to make educated decisions.

Why RCN Capital is the Perfect Partner for Brokers

At RCN Capital, we understand the unique needs of fix and flip investors—and the brokers who support them. Here’s why brokers love working with us:

• Fast Closings: We can close loans in as few as 10 business days, helping your clients move quickly on opportunities.
• Flexible Programs: From fix and flip loans to new construction financing, we offer a range of options to suit your client’s needs.
• Broker-Friendly: We value our relationships with brokers and offer competitive commissions, fast approvals, and dedicated support.

Whether your clients are seasoned investors or just starting out, RCN Capital has the financing solutions they need to succeed.

Conclusion

The fix-and-flip market is full of opportunities, but success begins with financing. Knowing the available options and having trusted lenders like RCN Capital at their backs is how you can help your clients pursue their goals while also growing your business. 

Ready to take your brokerage to the next level? Contact RCN Capital today and let us assist you and your clients succeed in the competitive world of fix and flip investing.