Interestingly, it’s not only large-scale real estate businesses with loads of cash that are getting in on the house-flipping trend. Many newcomers to this stage are everyday people with a knack for home improvement, including couples and sole proprietors. If you’re in this situation, how can you get the financing you need to keep your business going for a long time?

Is Traditional Financing an Option?

Traditional loans or small business loans can work great for purchasing owner-operated properties, but they’re a poor choice for house flipping. SBA loans aren’t designed for investments, and traditional loans are too time-consuming to be effective. It can take several months to get approved for a conventional mortgage. By that time, any hot deals you found are either gone or more expensive.

Which Financing Options Work Best for Fix and Flip Projects?

Fortunately, there are several alternative funding methods for purchasing the property you need quickly and easily. These options are available for many business owners regardless of credit rating.

Hard Money Loans

This type of financing offers a large loan amount with terms of 12 months and excellent loan-to-value ratios. The property acts as collateral for the loan, which means you can generally get approved as long as your credit score is around 600-650.

Home Equity Lines of Credit

If you own a primary residence, you can use the value of your equity for a line of credit. This flexible capital option is gold for house flippers because it provides funds for the initial purchase and remodeling costs. Lines of credit tend to offer lower financing amounts than loans, but they’re ready to go for every project instantly.

Investment Lines of Credit

This type of line of credit revolves around a commercial investment property that is providing you with a stable income. You can use a line of credit to gradually upgrade your commercial real estate while managing the property or use the funds for house flipping on the side.

Bridge Loans

Another type of asset-based lending, bridge loans are mainly used for commercial real estate projects. They work like hard money loans but offer larger funding amounts, faster processing and higher interest rates. They’re exclusively for fix and flip projects with short turnarounds.

The entire premise of fix and flip projects depends on being able to find good properties for great prices, make improvements and sell for a profit. To do these things effectively, having plenty of capital is vital.