Fix and Flip loans: what borrowers and brokers need to know

Most people have heard of the show “Flip that house” and become enamored by the quick profits of fix and flipping a house. Unfortunately doing a fix and flip is not that easy. This article on fix and flip loans is mean to inform borrowers and mortgage brokers about the true risks and possible rewards of flipping a house. Fairview is recognized as the leader in private lender/hard money lending. There are many misnomers about fix and flip loans. Below are frequent questions we have received about fix and flip loans:

  • What is a fix and flip loan
  • When is a fix and flip loan used?
  • Why would someone need a fix and flip loan?
  • What should I know about fix and flip lenders?
  • What is needed to get a fix and flip loan?
  • Who are the fix and flip Lenders in Colorado, Georgia, and Illinois?
  • Are there local fix and flip lenders?
  • How can I trust a fix and flip lender?
  • What should I expect from a fix and flip lender?
  • What is the fix and hold strategy

The questions above along with many other questions about fix and flip are answered in a recent article that was written by Glen Weinberg (the COO of Fairview Lending) for the Scotsman’s guide. Glen is widely known throughout the country as an expert on fix and flip loans and non-conventional financing including private lending and hard money lending. Below is an excerpt of the article on fix and flip lending along with a link to the full article.

Nip the Flip

Should mortgage brokers and originators discourage fix-and-flips?

For years, myriad homebuyers have tried to make fortunes by fixing and flipping homes. In reality, however very few people are successful with the fix-and-flip model, as there are numerous conditions that must be ideal for a fix-and-flip investment to be worthwhile. For instance, the home’s purchase price must leave ample room for rehab costs, and the rehab estimates must be accurate Further, the home’s final sales price must be close to the buyer’s original estimate, and the property must be sold quickly enough to allow the flipper to move homes and proceed to the next deal. Bearing in mind these factors, mortgage brokers and originators should advise their clients that there’s significant risk in flipping a house.

In lieu of the fix-and-flip model, brokers and originators increasingly are suggesting that their clients take a different approach: what one might call the fix-and-hold approach. Under this model, investors buy a property, rehab it and then rent the property; ultimately either selling it or simply holding it in their portfolios.

Clients should know that this model is considerably less risky than the fix-and-flip model. For instance, with the fix-and-hold model, investors aren’t pressed to flip their properties as quickly as possible; instead, they have the ability to wait for market downturns to pass and still make financial returns from their rental income.
Fairview is a private lender that focuses its lending on the fix and hold model due to the decreased risk. Fairview Is also able to make loans for as long as 5 years which is radically different than the traditional fix and flip lender that focuses on loan terms less than six months. We believe the fix and hold model is in many cases a better strategy for the majority of investors

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Resources on Fix and Flip loans