How to Choose the Best Fix and Flip Lenders
If you’re looking for a short-term loan for flipping houses, whether it’s a multifamily rehab loan, an apartment rehab loan or a rehab loan for an investment property, choosing the best direct hard money lender is crucial. There’s no shortage of hard money lenders for fix and flip projects, however, you want to choose one that offers the best terms for your unique needs, while also genuinely caring about your project and its success.
So, what do you need to look for in a hard money fix and flip lender and what questions should you ask to ensure you’re securing the best fix and flip lenders terms?
RATES AND FEES
One of the most obvious things to look for when choosing a hard money lender for fix and flip investments is what their rates are. Generally, the rates of a hard money fix and flip loan will be higher than traditional mortgages from conventional financial institutions like banks, however, if you shop around you’ll be able to find attractive options.
Don’t forget to ask what fees you’ll incur. Most lenders charge fees at various stages of the loan and these need to be factored into your budgeting.
REPAYMENT TERMS
Another thing to consider when looking for the best fix and flip lenders are their repayment terms. For instance:
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Do they offer interest and principal repayments, or interest-only?
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Will the lender allow you to pay off the loan early without incurring a penalty?
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What are your options if the rehab takes longer than expected?
Also, consider if the fix and flip hard money lender’s terms are constant. You have enough to worry about without dealing with a lender whose terms change with the economy.
APPLICATION PROCESS
Unlike traditional financial institutions like banks, hard money lenders generally have easier and faster application processes that require a lot less paperwork. Many even allow you to complete your application process online. Ask your potential hard money lender for flipping houses how their application process works and see how it compares to other lenders.
Also, consider what is required to apply and qualify before you settle on a lender. Most fix and flip lenders focus on the property you intend to use as collateral or the deal you’re proposing, however, others may want to see your credit score, tax returns, and other assets.
CLOSING TIMES
Generally, the major drawcard for hard money rehab loans is how fast they can be closed. Be sure to ask a prospective hard money fix and flip lender how quickly they close their loans.
Some commercial rehab lenders offer extremely short closing times – some in as little as days. However, you need to be aware that this is dependent on you getting your documents in quickly and responding quickly if any additional information is required.
Additionally, not all lenders with short closing times offer this in their fix and flip loans for beginners, so don’t get swayed by short closing times before checking the fine print.
DOWN PAYMENT
Some fix and flip hard money lenders require a down payment of up to 20%, however, others offer hard money rehab loans with a 0% down payment. Again, this can depend on your experience and circumstances, so be sure to check what applies to you.
WHAT THE LOAN ACTUALLY COVERS
Some hard money lenders for flipping houses offer financing for the purchase price as well as the renovation or rehab costs. If financing the rehab of your investment is something you require, be sure to check that this is covered.
EXPERIENCE
Choosing a lender with vast experience can make all the difference. Additionally, if you’re working with a lender who has been around a long time, chances are they’ve weathered several recessions and will be able to help you through tough times in the future too.
Questions you could ask to determine just how experienced the fix and flip hard money lender is could include:
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How many hard money rehab loans have you issued?
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Do you have experience fixing and flipping properties yourselves, or do you deal with finance only?
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How do you underwrite your loans?
VERSATILITY
If you’re planning on flipping projects in the long-term, consider partnering with a fix and flip lender who offers the versatility to work across multiple projects. This includes the ability to fund varying sums of money, as well as the ability to fund the purchase and renovation of various property types such as multifamily, mixed-use and commercial properties. Additionally, not all fix and flip lenders can offer investment property rehab loans in every State. If you’re planning to invest in a different state to the location of a hard money rehab lender, or intend to invest in multiple states, it’s worth asking what areas the lender in question can serve. Working with one lender on multiple projects, as opposed to sourcing different lenders in different regions, is a good way to build a long-term relationship that will ensure better rates, terms, and availability of financing.
The last thing to consider is what your priorities are. Is it a fast-closing commercial rehab loan or the cheapest possible rates? Are you looking to build a long-term relationship with a lender, or just want someone who can help you with a one-off investment opportunity?
Whatever you’re looking for, Rehablend is one of the best fix and flip lenders in the country. We genuinely care about the success of your project and offer flexible bridge loans that can be tailored to your needs to ensure optimum ROI. To find out more or to see if our short-term loans for flipping houses are right for you, get in touch today.