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What in the World is a Fix and Flip Loan?

By Dennis Dahlberg Broker/RI 623-582-4444

Mortgage and Lending with Level 4 Funding NMLS 1018071 AZMB 0923961

January 23, 2020 03:00 PM

“What in the world is a fix and flip loan?” my friend Joan asked me as she cleared the table for our regular Saturday night dinner a few weeks back. “Someone came in today and asked if we would set them up with one and I had to admit I didn’t know exactly what they were.”

“It’s a real estate loan, but it comes from private lenders,” I replied. “Remember that house on Delancy Street that I pointed out? Well, this type loan could get me that house.”

Joan shook her head. “I can’t see why you’d want it—it looks like no one has been there for a number of years. It’ll be difficult to get money for that—remember I work for Sun Valley Corporation? They’re so tight you’re lucky to get money on a new place.”

“That’s what fix and flip loans are all about—fixing up a house with the funding and selling it to get money to pay off the loan—that’s the flip, by the way. The idea is to sell it at a profit, of course.”

“Well, yes, of course—you can enlarge the account you already have at SVC and make me happy.” She grinned. “Tell me more—it sounds interesting.”

“Okay. These type loans are short-termers—they are the types that banks don’t go for since there’s no money to be made from the interest. The borrower, if his application is approved, has a year to purchase, repair and sell the property in order to repay the funding. A really good point of these loans is that closing doesn’t take six months—an experienced lender who knows the ropes can close in two weeks.”

“They don’t pick through your credit history with a needle and if there has been a problem or two in the past—you remember that foreclosure I had? It’s not going to stop the entire process or immediately kill the application’s chances. Your credit score doesn’t have to be 850 either.”

“No one’s credit score is 850.” Joan said, laughing. “Go on.”

“Better still, they expect the property to need renovations—they do appraisals before and afterward. Now Arizona Fix and flip loans aren’t perfect nor are they for everyone. The lender is a business professional like everyone else—they need to be confidant that you can get the property in shape and market it into a profitable sale in order for them to get their money back. Liens are attached—I’m probably going to have to use that lot my father left me in case something goes wrong. I don’t want to use my house.”

“And you think you can do it? Have you looked inside the Delancy St. place and seen that it’s fixable?”

“I’ve only looked through the windows and walked around outside, but I called yesterday and made an appointment with the realtor to go have a detailed look. If I’m certain I can fix it up and sell it, I have a list of several private loan companies to make appointments with.”

“Sounds like you’ve been looking pretty deeply into this,” came the remark.

“You can’t go any other way in this type of thing—all the little fine points count. I want to fix this house up and get it sold—the more experience I have, the less I have to pay in interest on future loans. I don’t want to lose Dad’s property either. A fix and flip loan may sound peculiar, but once I’m through checking into it, I’ll know if it’s for me or not.”

About the Author: Dennis has been working in the real estate industry in some capacity for the last 44 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters and 5 amazing grandchildren. Dennis has been an Arizona resident for the past 43 years.