Finance Flips in Eugene and Springfield

How to Finance Your Flip…

How to financing your flip in Eugene and Springfield

Robert and I had a meeting the other day. He asked me to expand on his post “So You Want to Flip a House” because he had a lot of questions about financing rehabs.

So you found a rundown house that needs a rehab, so how do you get the money? There are two components to consider. Funding the purchase of the property and funding the renovation. There are multiple ways to fund a project but we will stick with some basic methods for now.

Use your cash…

Yes, it sounds so simple and easy. Just write a check for the house and then pay for the renovation with the remaining money in your bank account. Don’t you wish it was that easy? Yeah, me too… Most people don’t have that kind of money lying around. If you do though, it sure makes it easy to purchase the property and renovate it.

Use a home equity line of credit (HELOC)…

Do you have equity in the house your currently live in? The market has certainly added equity to people’s homes and this could be a valuable resource. Many credit unions will give you a HELOC with very little fees. You could tap into that equity to fund the purchase and/or the renovation. If you don’t have enough equity to fund both the purchase and renovation, you could consider using your HELOC money as a down payment on a Renovation Loan or the down payment for a private money loan.

Use a renovation loan…

This is a loan program through traditional banks. They are more complex and more involved than a HELOC. The fees will be a little higher. There are also more hoops to jump through such as getting estimates from contractors, but it can be a good way to fund the project. You will still need to have money since the bank will only fund 80-85% of the project. Banks want to know that you have some “skin in the game” if you are going to borrow their money.

Use private money…

This is another option if you find the right project. Private money lenders will lend on projects that banks won’t. They are fast and often the company loaning the money will evaluate the project with you to make sure it’s a sound investment. They want you to be successful so they want to make sure they are lending on a good project. Using private money is quick since they can close in as little as 10 days. It’s more expensive than a traditional bank. You’ll pay more in loan origination fees and you will have a higher interest rate. If you find a great opportunity and you need speed and flexibility, a private money loan might be your best option. 

Find a partner for the project…

100% of zero is still zero and 50% of $50,000 is still $25,000. If you have a property but don’t have the resources to fund the renovation, then consider a partner. It’s a win-win if you both make money and both bring something to the project. Don’t miss out on an opportunity because you didn’t want to share the profit with someone else. If you don’t get to do the deal, you don’t make any money either. You may consider partnering up with someone on your first few deals out of necessity or out of desire.

Ultimately, if you think you have a great deal and want help or a partner, we are always available to help you sort through your options. If you have any questions, don’t hesitate to send me a message. 

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