Where are the loans for house flippers in 2020?

The national mortgage and housing market continues to cycle. We could definitely be in for some interesting times if the FHFA completes a rumored IPO. The company which owns 80% of Freddie Mac and Fannie Mae would be almost 10x larger than the current IPO record. That recently went to Saudi Aramco for $25.6B.

IPOs typically either drive new rash decisions to pump up revenues and drive away long term users, or new leadership becomes under such intense pressure to meet quarterly earnings that they push the envelope too hard without concern for the future solvency of the company. That could take the US mortgage market in either direction. Either loans that are so costly and awkward no one wants them. Or so loose that we experience a bankruptcy larger than most national economies in the world.

While we watch that, and how the 2020 presidential election shakes out, where are the loans for real estate investors and house flippers now?

Transactional Funding

‘Micro flipping’ or real estate wholesaling appears to be one of the biggest trends for real estate investors in 2020. Transactional funding can help investors wield incredible liquidity in getting in, out and paid on these deals fast, and making incredible cash on cash returns.

Hard Money Loans

Someone still has to fix and flip these deals. This is where hard money comes into play for rehabbers. We can only hope it becomes easier to get, and lenders return to true hard money lenders and higher LTVs.

Private Money

True private money could be big for rental property investors in 2020. This is not the ‘private money’ lenders who are actually hard money lenders just borrowing the title. But instead capital invested by accredited individuals and family offices. It can take work to get if you don’t have the network yet, but it is still out there.

Venture Capital

Many entrepreneurs are also turning towards positioning their real estate investment companies as tech startups in order to attract angel investors, venture capital and crowdfunding dollars. Just understand raising this type of money can be a huge distraction from just doing business. It is going to take a sizable investment in marketing, legal work and a team that excels at this.

FHA 203k Loans

These loans are designed for end buyers. A new expansion of the 203k loan gives home buyers up to $50,000 to renovate and repair their newly purchased homes in Opportunity Zones.. This may be a great match for wholesalers who can hand off their deals to retail buyers who will do their own updates.

How will you fund your deals this year?

 

Wholesaling is pitched as one of the easiest and fastest ways to get into real estate and get paid. Finding deals and finding buyers in this market may not be too difficult. If the price is right, the property will sell. That just leaves the question of how you’ll fund your deals.

More and more investors are finding that sellers and buyers try to cut them out when they attempt to assign contracts, and aren’t closing on the buy side first. Here are five ways to finance your wholesale deals, and some of the pros and cons of each options.

Cash

You can use your own cash to finance deals like this. It can be extra cash on hand, retirement savings in a self-directed IRA, etc. It may be the cheapest option. The downsides of this are you’ll never be able to fulfill your full potential. You will be limited on the number of deals you can do at a time. You are bearing all of the risk or getting stuck with a deal. You won’t be maximizing your full ROI potential by using leverage.

Conventional Mortgages

If you’ve got awesome credit, plenty of assets, and a perfect income profile, there’s a chance you can walk into a bank or mortgage lender and get a conventional type loan. The problem is that few will close fast enough for you. It may take 30 to 60 days to close. Far more than the 1-2 weeks most sellers will expect. You are also going to need appraisals and maybe an inspection. Repairs and low loan amounts can quickly trample your loan application. Not to mention the high closing costs.

Hard Money Loans

Hard money is great for house flippers and distressed properties. It’s typically fast. Though you’ll still need skin in the game with your own cash, and likely the money on hand to prove you can afford the rehab. It’s expensive money, though that may not matter too much if you are in and out before the first payment is due.

Private Money

Private money is highly desired by real estate investors. True private money (not hard money lenders advertising ‘private money’) can offer great fluidity and flexibility in funding deals on the fly and on great terms. Once you start doing great at wholesaling, you’ll eventually find these people wanting to fund you and put their money to work to share in your profits. Just be wary of taking the long detours and getting distracted with trying to raise money instead of getting right into investing.

Partners

There are many potential benefits of partnering up with others, especially if they are bringing all the capital. Just be sure you get everything in contracts and writing to minimize the damage of future partnership breakups. Do the math carefully on your returns and how that compares to other options. Having a partner who will fund 100% of your deal is great. Though, if you’re giving up 50% of your profits, that may be far more expensive and less profitable for you than financing it.

Transactional Funding

Transactional funding provides 100% financing for real estate wholesalers. All with no appraisals or any of the underwriting hoops you’ll find with hard money lenders or conventional bank loans. It can be a lot cheaper than you think too. While giving you the ability to close in just a few days. That means you’ll be able to beat the competition with better offers, and keep all the profit.

Get in touch with Best Transaction Funding today and get your free proof of funds letter to make your next offer...

What does the mortgage landscape look like for investment property loans in 2015?

While Bloomberg Business notes that mortgage underwriting is becoming “incrementally easier” in 2015, the feds have opened up the gate to begin raising interest rates. These factors will have some impact on real estate investors as they evolve and grow. But for now the most important question remains “what loans are available for financing investment properties?”

Transactional Funding

Best Transaction Funding continues to fill the gap for property wholesalers. It provides 100% financing for quick flips. Normally without any of the credit, income, or asset demands of other loan types.

Find out how transactional funding works here

Hard Money Loans

Best Transaction Funding will soon be funding hard money loans from 1M+ (minimum) for select, serious, and experienced real estate investors with solid deals.

Hard money loans offer asset based financing for those deals and transactions that don’t fit the transactional or conventional loan model. They provide fast funding, without the hassle of traditional investment property loans from conventional banks and lenders. They can be great for new acquisitions, rehabbing, and refinancing.

Blanket Mortgage Loans

A variety of new blanket mortgage lenders and loan programs have emerged over the last two years. These programs can help investors with bulk property purchases, may act as bridge loans to unlock pent up equity in existing portfolios, and may streamline overall debt financing for buy and hold investors.

Private Money

Private individuals continue to be keen to put their money to work in real estate deals. For now they can offer better terms and easier lending than conventional lenders. The downside can be the extensive amount of work and time required to line up these relationships and financing. There may also be a substantial pivot in this trend as other lenders become more competitive in 2016 and beyond, and as they can obtain high yields from CDs.

Leveraging IRAs

Tapping IRAs and other types of retirement accounts to fund real estate deals has become increasingly promoted among the investment community. Self-directed IRAs do have great advantages. They can even be used in tandem with private money, transactional lending, and hard money. However, investors should recognize that touching the proceeds of these transactions might hamper their tax benefits. Highly active flippers should also consult their tax professionals to see exactly what the tax ramifications are for them.

Conventional Lenders

Traditional banks and mortgage lenders still have a lot of catching up to do. This is particularly true when it comes to LTV, paperwork burden, and speed. More exotic loans are making a comeback, but these lenders are rarely of benefit to most investors in the current market.

Summary

Investment property financing is still plentiful for those that know where to go, and work with the best lenders for their investment strategy. Whether, and how fast main street banks will be to catch up will be to be seen.

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Authored by Best Transaction Funding BestTransactionFunding.com is the leading source of transactional funding and hard money loans for real estate wholesalers in the US, where 100% financing, and saying “Yes” is what we love doing all day long.