How to Finance a House Flip

The biggest problem for people wanting to house flip is obtaining the financing for their deals. The major confusion many face is in deciding whether it would be better to find a deal or get hold of the finances first. However, by following certain steps you can actually get your hands on the required money and find a solution to your problem.

The first rehab is always the most difficult to fund and once you manage to do this then there will be no stopping you. Now we need to understand just why the first time is the most difficult. The major cause is that you are unproven, you have lower net worth and you are facing some stiff competition from others around you, and finally it is a known fact that real estate is a risky business, especially for a new and untried investor.

Lending is not as easy as it sounds, and you need to know that even traditional lending is generally preferred by the investors, and these institutions will always hesitate to finance more than 80 percent of the actual appraised casino value of the investment property. The rest of the money for the investment needs to come from the investor savings.

For your own benefit it is highly recommended that you seek partnerships. This is not an uncommon practice in the real estate business, and especially not when it comes to house flipping. If someone shares the cost, then they also share profits – it is a fair risk, and since two people are always better than one, considering a partnership is important.

Moreover, you can find some private lenders as well. This is the most suitable course of action for the initial transaction and later for some risky ones. These lenders are never easy to find but are very useful in financing a house flip. It is very important that you form a friendly working relationship with the lender so that you can openly communicate with him/her and discuss future possibilities.

Creating a network and marketing yourself is also very important to find potential lenders. Talk to people in your network and let them know that you are looking for lenders. If you know someone who has invested in other projects then he or she needs to be approached by you at the earliest. Using popular social networks to pursue leads is also recommended once you have successfully completed a few projects.