bigbrisf,  in San Francisco, CA

What are my financing options on a fixer upper to flip?

Asked by bigbrisf, San Francisco, CA Sun Jun 24, 2012

I am looking for first time financing on a fixer upper to flip. It will be non-owner occupied and I plan to rehab and flip the property in 4 to 6 months.
I have been reading that I won't get conventional financing if the property needs work, that I don't qualify for HUD 203(k) as an investor, that banks don't give construction loans on spec houses, and that private lenders will only loan up to 65% LTV.
So, how do I finance my first flip?!

Help the community by answering this question:


We will lend 65% or more based on the After Repair Value.
0 votes Thank Flag Link Wed Feb 20, 2013
We do business loans for our clients that are currently in business or wanting to get started in business. Real Estate investors are in business therefore they are able to obtain a business loan. Depending on your goals one program we offer may benefit you. We offer a no document business loan, no collateral on the property as it is a business loan and you are able to finance 100% or more. Many of our investors finance the repair/upgrade costs into the loan. The loan is based completely on your credit. You must have a 620 or above to apply. Some of the factors we consider is the length of your credit history, how much available credit, how many recent accounts have been opened etc. We need to prove your ability to repay the loan based on your personal credit. You are welcome to contact me anytime with questions.

Dominique Wilder
Universal Acceptance
0 votes Thank Flag Link Sat Jul 28, 2012
Ok, of it's distressed and needs work, then you will not be able to obtain FHA financing and definitely won't be able to use a VA loan if that was even an option. You basically have 3 options.

1) Cash - either your cash or partner with an investor
2) Conventional Financing - depending how bad the home is, you may qualify for a conventional loan with 20-30% down. I rehabbed a duplex that had mold from a broken pipe, flooded room, needed to gut 4 bathrooms, etc, and I was able to obtain financing. The key is that utilities were off and the appraiser was only able to see things and both units had all tubs, toilets, a/c's,, they were not aware nothing worked. But I fixed everything and have been renting both sides for a couple years now.
3) Hard Money Loan

For information on hard money lenders, check out this webinar (it's about 55 minutes long):…

As far as investing, I'm a believer in asset aquisition and long term equity gain rather than short term flips, but both have a purpose and goal. Check out my blogs on investing....

Hope this helps!

Darrell D. Drouillard
Home Team of America
16719 Huebner Rd., Bldg 4
San Antonio, Texas 78248
210-881-6760 (Fax)

'Serving all Your Real Estate Needs'
0 votes Thank Flag Link Mon Jun 25, 2012
You might have to partner with an investor who has cash. If you need a referral, feel free to ask.

0 votes Thank Flag Link Sun Jun 24, 2012
You have different options than cash. If you do a construction loan it'll be a 6 to 8% interest rate but, you can bank on the equity game later on.

But, here is how it generally works as far as I understand it: so long as you have 25 to 40% equity in the total end project – what it will be appraised at after everything is done – then you can borrow the other 60% – albeit at a higher interest rate. But, once the final house is complete and the construction loan is closed out then you could get a conventional loan to replace it. Given the fact that interest rates are at 4% it still makes more sense to borrow the money rather than paying in cash. The deductibility is one thing but the interest rate at 4% versus, say, 6% is pretty substantial too. 20% of your mortgage payment will go to principal under the 4% model whereas 10% under the 6% model. Therefore, inevitably you will also gain in terms of natural appreciation of the market over time. And, if you were to finance everything in, say, 15 years the interest rates are near 3%.

You're banking on the fact that money borrowed is so cheap right now. Yes, you can put your money in the bank and get one or 2% interest at best. But, if you were to put everything into a safe capital bond money market account for example you can get a return of seven or 10%. That's according to my client who works at Merrill Lynch who does these things.

If you have a mortgage lender at bank ask them about those types of loans. Otherwise, mortgage brokers are an excellent at this. My mortgage broker is wonderful at this and I can refer you.
0 votes Thank Flag Link Sun Jun 24, 2012
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