The key to real estate investing is leveraging other people’s money to cover your fix and flip financing.
Getting your fix and flips covered 100% comes down to 3 things:
- Finding the right money
- Striking at the right time
- Understanding hard money
Especially for new investors, hard money (also called private money) loans are usually the key. Hard money is flexible and often has less rigid requirements than more traditional loans. This makes them perfect for fix and flips.
3 Ways to Get 100% Financing for Fix and Flips
Especially in today’s real estate climate, using hard money is a crucial link in the chain of building wealth.
Rates are high and a lot of banks are offering fewer loans. So where are you going to find the money?
There are three strategies that help you leverage hard money to build wealth by covering 100% of fix and flip financing.
1. Find Great Deals
This may seem obvious, but it’s more important to be strategic than ever before.
Look for properties that have a minimum 70% ARV (After Repair Value). Take your time to make sure you’re finding properties that are going to have a solid return. Don’t take risks on properties that aren’t likely to flip.
Remember: it’s better to have 2-3 solid deals than 6-8 bad or marginal deals.
So look for those 70% ARV properties.
2. Cross Collateralize
Sometimes called “crossing,” this strategy lets you use one property to get another at 100%.
If you have another rental, a home, or a fix and flip that’s hit the market, you can use that property as leverage to get the next property.
You will need to have a mortgage on both properties. Doing this basically gives the lender more protection. If you’re confident that you’ve picked good properties with high ARVs, then cross collateralizing is a fairly low-risk move on your part.
As long as you get that flip done and paid off, then both liens are released once you sell the new flip.
3. Find a Cosigner
Again, this strategy helps lenders feel more secure on their end. If you’re a new investor, it can be helpful to find a guarantor with the assets who’s willing to cosign on a loan.
As with crossing, as long as you’ve selected strong properties, this is a low-risk strategy that simply allows you to get 100% financing that you can pay off when you resell the property.
Your guarantor should never need to pay a cent, but it makes it easier for the lender to approve financing.
Fix And Flip Financing Made Easy
The market is gearing up to be great for real estate investors. Don’t be afraid to start your investment journey. Just remember:
- Find great deals
- Cross collateralize
- Find a cosigner
Hard money loans are a great place to start. They’re flexible, and you’re more likely to find 100% financing through a hard money lender, especially as a new investor.
If you do end up needing DSCR or other traditional loans, you can check out our sister company, The Cash Flow Company.
If you’re interested in discussing a deal, reach out to us at Info@HardMoneyMike.com. We’re always happy to run through deals and answer questions.