The problem with house flipping is not the risk a Methacton buyer is taking, it is the difficulty they may have in getting it financed. While some house flippers are able to start with their own money and buy their first property with cash, many are not so lucky. Funding Methacton investment properties is not the same as buying homes to live in. However, there are many ways to get the money needed to start flipping houses.
One option to fund Methacton investment properties is to look at crowdfunding. Crowdfunding is different than other funding sources because it is not a lender from a bank or investor. Instead, it is many people coming together in one group that is connected through the internet to raise enough money to fund a project. Sometimes there are so many people only a few thousand will be paid by each person in the group.
The interest rate on a crowdfunded loan can vary starting on the lower end of eight percent and moving upwards to eleven percent. Most of these loans are shorter terms with the money needing to be paid back within a year.
Anyone that is investing in Methacton properties is likely to already own a primary residence. With their primary residences, they can use a cash-out refinance option to access additional funds. Cash-out refinancing uses the equity that is in the primary property to allow the homeowner to borrow more money than they already own on the home. This extra money borrowed can go towards Methacton investment properties.
Keep in mind that borrowers will need a credit score that is at least six hundred and forty. Plus, their debt-to-income ratio needs to be no higher than forty-five percent. The home also has to have around a third in equity earned before it qualifies for a cash-out refinance.
The interest rate on this type of loan is not going to be favorable for the buyer. It is simply adding on to the existing mortgage for a higher amount. Other options can save a person from paying these high-interest rates. Plus, the borrower will need to pay closing costs on the loan again.
This type of funding is solely for investors who are interested in buying properties. It may be called an “acquisition line of credit” or an “investment line of credit.” The terms for this loan will also be shorter, lasting no longer than two years. It will give the borrower the opportunity to use money as they need to without exceeding a set amount.
Many investors start using this type of funding once they have completed a few house flips. Once they know how the process works they can get the money they need to buy, renovate, and sell within the small amount of time. It is a quick way to get the cash needed and most will be approved in less than a month with interest rates up to eight percent.
Instead of approaching a bank some investors use private lenders. With a private lender, they can provide a hard-money loan. Sometimes this will be a single investor or it could be a group of investors. These investors want to see a return on their investment so the terms are very short keeping to six months or a year.
Since it is people funding the loan they typically ask for a higher interest rate ranging from ten to twenty percent. A borrower should expect to pay some money to the lenders upfront – up to six percent of the loan – but they can get the money they need within a week.
Be aware that these investors will only provide up to seventy-five percent of the purchase price of the Methacton property, leaving the borrower to provide a sizable down payment. The best thing about hard-money lending is the ability to get a loan without a good credit score. Most will even take credit scores of five-fifty or higher.
Someone that does not owe on their Methacton home may use a home equity loan or home equity line of credit. With either option, a homeowner can borrow money against their Methacton home for an investment. However, the loan will provide all the money at once while a line of credit is used much like a credit card. Money only needs to be paid back as it is borrowed in a line of credit.
The loan option is better for those that are investing in a Methacton property to flip and up to eighty percent of the value of the home can be borrowed. The interest rate on the loan will stay the same and it is much lower than other investment options. Most people can deduct it on their taxes, as well.