If you want to purchase homes with the express intent to fix up the home and flip it, and you want to secure financing for this type of investment, you need to understand that getting financing for a non-primary home is different than getting financing for your primary residence.
#1 Borrowing More Than the Cost of the Home
When you are purchasing a home to fix it up and flip it, you are borrowing more than the cost of the home. You are taking about a loan for the cost of the home, as well as the cost to repair and fix up the home. So, you are asking a lender to put more into the home than it is worth right now. That is where this type of loan starts to be different than a traditional loan. You are asking to borrow more than the home is currently worth and are asking the lender to believe that you will fix up the home and be able to flip the home for a profit.
#2 Need to Have a Detailed Fixing Plan
Second, as you are asking a lender to give you more than the worth of the home, the lender is going to want to see your plan for fixing up the home. They are going to want to see a detailed breakdown of what is wrong with the home, how you plan to fix it, and what it will cost to fix up the home.
You can't go into this type of loan empty-handed. You need to have a firm grasp on the repairs needed to raise the value of the home and an accurate idea of what the construction costs for the home will be.
#3 Need to Have Cash to Put Down
When you want to flip a home, don't expect to get a lender who is willing to allow you to put down 0% for the loan. When working with lenders who deal with asset and investment loans, they are going to want to see that you are invested in the project. You can show your investment in the project by being willing to put down a traditional down deposit, such as 20%.
The lender wants to see that you are really invested in the project, and money is how lenders value investment. Make sure that you have the cash to back up your loan request and get things started. With a home you are planning on flipping, it is also always a good idea to have savings as well. This will show the lender that you can afford to make payments on the home as you fix it up and then go through the selling process.
If you want to flip a home, you need to have a realistic idea of what type of repairs and upgrades the home will need to increase its value. You also need to be willing to invest money in the project and show that you have the cash necessary to cover the loan payments while you fix up and prepare to resell the home. For more information, contact a company like NW Private Lending.