The housing market is bouncing back. After a period when people were concerned that flipping houses was no longer lucrative, the tables have once again turned. Investors willing to put equity (both financial and sweat), into distressed properties are seeing solid returns. So what if you want to get into the business but don’t yet have the funds to buy a property? Consider using these five creative flip funding options to finance your purchase.
Consider co-funding with partners:
Before you jump into an independent purchase, talk to other investors and contractors to see if anyone would be willing to partner with you on the purchase and share profits with you at close. This can be a good route if you’re nervous about getting into the business, because though you’re sharing profits, you’re also sharing risk. That means your only on the hook for a portion of what you’d be taking on if you go it alone.
Get a home equity line of credit:
Many people don’t think about this, but flipping a house is really an investment in yourself. If you’re confident in the potential of the home you’re flipping, you can use your house as loan collateral to buy it. This can be a good move for investors who are just getting started because you can access the funds you need quickly. Just make sure you fully understand the rates, fees and risks before you commit to a home equity loan.
Get an official line of credit from the bank:
If you flip a few houses a year and your credit is in good shape, you can get an official line of credit from the bank to fund your projects. The biggest benefit of a bank line of credit is you don’t have to worry about where your next round of funding is coming from. Usually, a line of credit is designed to be available for multiple projects. If you go this route, the bank will most likely conduct occasional check-ins to see how projects are going and to make sure everything is on track, so keep that in mind as you weigh your options.
Consider crowdfunding sites:
Crowdfunding has become a lucrative pathway to funding home flips and investment projects. The benefits are, it’s easy to post a project and you’re able to tap into a much wider network of investors. The cons are, interest rates tend to be higher because the investors need to get paid too, and it can sometimes be difficult to find a site that supports the type of project you’re seeking funding for. If you’re wondering whether this might be a good route for you, read this post to learn more about crowdfunding.
Check out government funded flips:
An abandoned house on an otherwise populated block can be much more than just an eyesore. Empty houses invite squatters, which can increase drug activity and raise crime rates. The home’s neglected electrical systems can also create a fire risk and frozen pipes can lead to long-term structural damage. The list of potential issues goes on and on. That’s why cities often sell abandoned homes for pennies on the dollar to investors willing to transform the property into a livable residence. Check out the US Department of Housing and Urban Development’s (HUD) website to see if there are any bargain homes for sale in your area. If the home is in bad enough shape, it may also qualify for government funding for renovations. Learn more about HUD home flips.
As you can see, there are plenty flip house funding options out there. You just have to weight the pros and cons of each to determine which option is the best fit for your project and circumstances.