How to get a flip/fix loan for investment property

With the job loss and belt tightening since the onset of the Great Recession, many people have been wary of investments. However, now that the economy is in full recovery mode, adults young and old are beginning to once again consider how to make their money work for them now and in the future.  It’s hard to argue the merits of buying low and selling high in a flourishing real estate market.

Of course, some of us are still recovering from the recession and trying to get our personal finances back in order after job loss, home foreclosure, or other financial issues. If you’ve ever pursued the prospect of buying a home with bad credit, you may wonder if fix and flip opportunities are just a pipe dream.

There are solutions that work for just about anyone willing to put up some of their own money, come up with a solid plan, and do the work to transform a fixer upper into a move-in ready home for another lucky buyer. Here’s what you need to know about loans if you’re looking to invest in fix and flip real estate opportunities.

Traditional Loans

For the uninitiated investor, a traditional home loan might seem like the best place to start when it comes to securing funding for a fix and flip venture. If your credit is stellar, your debt-to-income ratio is low, and you already have some capital on hand, this is not a terrible option. Banks are often willing to reward low-risk applicants with the loans they seek at decent interest rates.

Unfortunately, many people fell on hard times during the recession and their credit took a hit as a result. Even if you happen to have some money set aside for your project, you might not know how to get a home loan with bad credit. In truth, you simply might not gain any traction with traditional lenders. There are other options to consider, however.

Hard Money Lenders

If traditional lending institutions turn you down due to poor credit or other conditions, your next step should be seeking out hard money lenders in California, New York, or wherever you plan to fix and flip homes. These lenders have very different requirements and may be able to accommodate you.

Generally speaking, hard money lenders don’t have the same requirements in terms of your credit score as traditional banks. Whereas you might need top-tier credit to secure a traditional loan, a hard money lender may require a much lower score. Or they might not check your credit at all. In this case you could receive approval and access to funds in as little as just a few days, rather than having to wait weeks for the loan approval process to go through with a bank.

There are tradeoffs, as you may have expected. You will have to come up with more capital in order to secure funding. Hard money lenders typically require you to put up 25-35% of the purchase price. In addition, you may pay interest rates of double or more what traditional lenders offer.  However, the numbers are likely to get much closer as interest rates for banks start to increase.

However, since you have fix and flip opportunities in mind, you’re probably not planning on paying the mortgage very long.  In this case, interest rates won’t have a significant impact on overall budgeting.

Private Money Lenders

Hard money and private money lenders in California are similar in many ways.  For example, credit isn’t a major factor, the approval process is faster, and you’ll have to put up more capital initially to gain approval. However, hard money lenders tend to be organized professionals.  Private money lenders, on the other hand, are private individuals looking for projects like yours to invest in.


To be honest, this is a complete longshot. You might see the success of business ventures on sites like Kickstarter and consider crowdfunding a great idea. The problem is that most of those businesses have something to offer in return for funding. What will you offer your investors? Points on the back end?

There are, of course, websites designed for real estate crowdfunding specifically.  However, because of the complexities involved, this should probably stand as your last resort when you’ve exhausted all other options.