Lenders require at least 20% down on investment property. The best way to finance a flip property is to obtain a short term interest only portfolio loan due in 12 months. This increases the buyers cash flow to renovate the property. Some lenders are willing to set up a purchase loan based on the current appraised home value. This allows a buyer to purchase the home with little or no down payment based on the current home equity. A buyer may also have the option of simultaneously allowing the lender to provide a lien against another property that the buyer owns with equity. This would provide extra cash to renovate the flip property. A portfolio loan has lower closing costs and can be set up to allow for no monthly payments. This type of portfolio loan is due in 12 months. The loan can be extended for another 12 months with interest paid for only a couple hundred dollars if needed. Other portfolio loans can be 3 to 7 years long if needed, but require a monthly principal and interest payment with an amortization of up to 20 years.
- example= A buyer would like to purchase a flip home for $80,000. The home has a current appraised value of $94,000. This would give the buyer an automatic 15% down payment. Since the bank wants 20% down, this leaves the buyer only needing 5% down plus closing costs.