The competitive nature of today’s real estate market has made it difficult for investors to achieve healthy returns consistently. Low inventory in various markets means there aren’t many options to choose from, and high rates have made margins incredibly slim. That’s why many are turning to alternative strategies like home flipping, seeking out older, neglected, or off-market properties to bring to market while still achieving a healthy profit. These types of projects demand specialized financing, however. Loans need to be approved quickly so investors can get started on their projects sooner and maximize returns.
For brokers and lending partners, offering fix & flip programs can help you tap into a new segment of investors and positions you as comprehensive resource for real estate financing. Read on to learn more about these loan programs, how they differ from conventional loans, and how you can use them to win in today’s competitive landscape.
Fix & flip loans are financing programs offered by private lenders for the specific purpose of renovating and reselling real estate properties. They differ from conventional mortgages because they have shorter loan periods, ranging from 12-24 months, and they provide borrowers with additional renovation funds on top of financing the property acquisition. With fix & flip loans, underwriting typically focuses on the ARV (after-repair value) of the property which can speed up the approval process and allows for more flexible loan terms. Flexibility is key, because it means lenders are more willing to work with borrowers to tailor financing to a specific deal scenario. For instance, borrowers can opt for interest-only payments, which frees up available capital until the project is completed.
Not every fix & flip loan is built the same, because not every lender operates in the same way. If you want to ensure a fast & smooth loan process, you’ll need to do some due diligence before choosing a program. Your lender should have experience in the real estate and home flipping space, and they should prioritize communication and reliability in their process. Loans should be based on ARV and should include renovation funding, because these qualities help borrowers maximize their leverage.
When financing renovations, funds are typically disbursed in a series of payments called draws rather than lump sum payments. This is a key benefit since it reduces the amount of interest paid over the life of the loan. You should also look for lenders who offer interest-only payment structures, as these options can provide borrowers with more available capital and can help them complete projects faster.
As a lending partner, you play a bigger role than just matching investors with financing options. You are often a crucial part of the investor’s team, helping them manage expectations and guiding them through the loan process as quickly as possible. Understanding the lending landscape and being familiar with fix & flip program guidelines is the first step to making better recommendations that help your clients win. You should also be able to offer clients multiple different options so that you can pair them with a program that best fits their specific needs.
When you begin the process of applying for a fix & flip loan, be sure to sit down with clients and walk them through the typical process. Encourage them to start gathering documents early, create a detailed timeline & budget, and start talking to contractors to receive quotes. Also call attention to the common problems that delay closings, such as incomplete documentation, inaccurate budgets, and permitting issues.
Fix & flip financing offers brokers a way to supercharge their deal pipeline, with a specialized program that lets investors tap into a new source of properties and maximize investment returns. Offering fast and reliable financing means your clients can win more often and beat out the competition even in highly competitive markets. Getting deals done faster also means that serial investors can take on more projects throughout the year, which means you close more deals. Finally, these programs help you position yourself as an expert in the space, and a financing partner that can fund any sort of deal. Marketing yourself as a comprehensive resource can help you capture more business and reach a new segment of investor clients.
If you want to provide your clients with a stellar lending experience, partner with a lender that has a proven track record in the real estate investing space. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors and lending partners. If you are looking to offer fix & flip financing to your clients, RCN Capital has competitive loan options and an award-winning broker referral program available to partners.