Home flipping has become one of the most reliable ways for investors to generate returns in today’s competitive real estate environment. Many markets across the country are still facing inventory problems, but investors can capitalize by bringing desirable homes to market in these areas. However, they tend to run into trouble when securing financing for fix and flip projects, as conventional loan structures are not designed with renovation budgets and short timelines in mind. Brokers and lending partners play a key role here, matching clients with loans that match their investment needs and experience levels.
Continue reading as we discuss the benefits of specialized fix and flip financing and why investors rely on these programs to find success in the home flipping space.
Seasoned investors will have different needs than first-time home flippers and will demand loans that are more suited to their experience level. While banks loans might work for the occasional investor, experienced flippers will place an emphasis on speed, flexibility, and repeatability. The financing programs they utilize should reflect these needs, with fast approval times, customizable terms, and higher LTVs that include renovation budgets.
Often, a major renovation project will not qualify for conventional financing as banks may view these investments as too risky. Luckily, the private lenders who offer specialized fix and flip financing are more open to major rehab projects, and experienced investors can obtain more favorable terms to make these projects happen.
One of the greatest advantages that fix and flip loans offer to investors is faster approvals and closings. In today’s highly competitive real estate landscape, speed is key to making winning offers on the lucrative opportunities that go quickly on the open market. Private lenders understand that time is of the essence in securing these deals and can provide borrowers with a streamlined process that delivers funding in as little as ten days after application submission. This also means investors can expand their property search to alternative sources like auctions, foreclosures, and off-market deals that are more time-sensitive.
From a broker’s perspective, this allows you to position yourself as a fast and reliable funding source that can deliver more value to your clients and expand their options.
Traditional mortgages are fundamentally not designed to accommodate the short-term nature of fix and flip projects. Private loans resolve this issue by structuring financing with customizable terms, and loan amounts based on the after-repair value of the property rather than its current condition. They also offer draw-based renovation financing, where interest is only charged on funds after they have been issued at each step of the process. Additionally, many lenders offer interest-only options, where the loan principal is only due at the end of the financing term. This flexibility is great for experienced investors since it helps them manage cash flow more effectively across multiple projects.
Fix and flip loans provide investors with greater leverage than conventional loans because they typically include additional funding for renovation expenses on top of acquisition costs. This helps experienced investors preserve liquidity, giving them the ability to conduct multiple projects simultaneously. It is also crucial to keep reserves when home flipping, since there are often unexpected costs that arise during the rehab process. By adding these programs to your loan offerings, brokers can present clients with a solution that facilitates growth and better positions them for long-term success.
When flipping properties, being able to reliably fund and execute deals is more important than simply securing the cheapest financing. The cost of delays or missed closing is high, causing investors to lose out on great opportunities or pay more in holding costs.
As a lending partner, you should act as an advisor that improves your clients’ investment strategy rather than just being a source of financing. Look for programs that offer consistent guidelines and a transparent process that ensures your client doesn’t run into issues that might derail their fix and flip projects. Pair clients with a loan structure that matches their experience level and assist them in planning their investments to best navigate potential delays and maximize returns.
Specialized fix and flip loans provide your clients with many benefits over conventional mortgages, especially when dealing with experienced home flippers. These programs are tailored to the needs of fix and flip investors, with advantages like speed and ARV-based underwriting that traditional loans cannot provide. They enable clients to scale more effectively and are designed to help investors achieve long-term success in the space.
Brokers can benefit from partnering with private lenders who have experience in the fix and flip space, because they truly understand the demands of these investors. This enables you to provide a better experience to fix and flip investors, which helps you grow your pipeline by building long-term relationships that lead to repeat business.
In order to maximize the returns on your clients’ investments, partner with a lender that can provide you with the best leverages and rates. 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 and flip financing to your clients, RCN Capital has competitive loan options and an award-winning broker referral program available to partners.