Where to Find Loans for Fix and Flip Deals
November 27, 2012 
3 Comments
During the average conversation with real estate investors, it takes just under 37 seconds before someone mentions how many more fix and flip deals he would be doing if he could just get a loan. Much like after a fisherman finishes a tale about the one that got away, the audience nods knowingly. While some people are unlendable, most are not. As a part-time real estate investor, you have a huge advantage—Your Job! The real problem is knowing where to look.
While the large banks (Chase, BOA, Wells Fargo) are a waste of time, many local banks are more than willing to do loans for fix and flip properties. Call the bank, ask for a loan officer, and ask him or her if they do Construction or Rehab loans. When you find someone who says yes, set up an appointment to meet. Ask what financial information the bank will need and bring it to the meeting. Most will ask for a Personal Financial Statement which you can download from the SBA. I also recommend a sample proforma or a one-page document showing your goals, what type properties you intend to purchase, etc. This will show you have put some thought into the concept and will set you apart from other borrowers.
There are 3 reasons to meet with the loan officer as soon as possible. First, having a lender in place shows your real estate agent that you are a serious investor. Second, you often need a pre-approval letter when you make an offer. If the bank already has your financial information, it only takes a few minutes to generate a letter. Third, the lender will be able to give you terms and estimated closing costs. This will help as you prepare your estimates.
For reference, here are sample terms.
- 6 month interest only loan at 6.5%
- Investor puts down 20% or purchase price
- Investor pays for appraisal, title work, and ½% origination fee
- Rehab costs are reimbursed as draws with proof of work being complete
- Loan can be extended another 6 months for a nominal fee
Finally, do not limit your search to your home town. I have two lenders who are 45 miles away.
Erik Hitzelberger has been Real Estate Investor since 2007. While learning the ropes in the market down-cycle, he now teaches others how to use his systems and leverage other people’s expertise to achieve their own goals.
Erik Hitzelberger – who has written 194 posts on Part Time REI.
Really liked what you had to say in your post, Where to Find Loans for Fix and Flip Deals | Part Time REI, thanks for the good read!
— Gerardo
It is hard to locate knowledgeable folks on this subject, but you sound like you know what you are talking about! Thanks
Thanks for the comments. We really want to show other investors that you don’t have to believe all the hype that the “banks are not lending anymore”. You just have to go to the smaller community banks in your town and the surrounding towns and demonstrate you have a plan. They are willing to lend. Hope you learned something helpful from our post. Happy investing!