A Fix and Flip Loan, also known as a hard money or bridge loan, represents a specialized form of asset-based financing in the realm of real estate. In this financial arrangement, a borrower acquires funds that are secured by the assessed value of a specific real estate parcel.
At 4Real Estate Capital, we collaborate with lenders who specialize in providing financing solutions tailored for fix-and-flip property opportunities. Contact us via phone or email today to explore the possibility of securing the best rate quote from our network of preferred lenders.
Fix and Flip loans are distinguishable by their higher interest rates compared to conventional commercial or residential property loans. Typically, these loans are not extended by commercial banks or traditional deposit institutions. The structure of a Fix and Flip loan shares similarities with a bridge loan, encompassing comparable lending criteria and costs for borrowers.
The primary distinction lies in the fact that a bridge loan often pertains to commercial or investment properties undergoing a transitional phase that doesn’t yet qualify for conventional financing. On the other hand, hard money not only signifies an asset-based loan with elevated interest rates but may also be associated with distressed financial scenarios, such as mortgage arrears, bankruptcy, or ongoing foreclosure proceedings.
Private investors, often localized in the borrower’s community, commonly provide Fix and Flip mortgages. The borrower’s credit score usually holds less significance in these transactions since the loan is secured by the collateral property’s value. Typically, the maximum loan-to-value (LTV) ratio ranges from 65% to 70%. For instance, if the property is appraised at $100,000, the lender would disburse $65,000 to $70,000 against it. This conservative LTV ratio serves as an additional layer of security for the lender, offering protection in case of borrower default and the necessity to foreclose on the property.
