Asset-Based Loan for 2023
In the midst of 2023, financial freedom may seem out of reach. However, if you know the right places to target and have the resources to do so, many undiscovered gems are waiting to be uncovered. One of the best ways to generate valuable liquidity is fixing and flipping real estate.
Not only can you make a significant profit in a timely fashion, but you also have the opportunity to take something stagnant and breathe new life into it. However, getting started without the right investor loan can be challenging. With the proper fix and flip loans, you can get over the hump of starting costs and start flipping homes today.
The Real Estate Market in 2023
In 2021, due to many factors, including surges of new COVID-19 variants and a topsy-turvy economy, the housing market saw unprecedented activity in the U.S. Homes sold exceptionally well at an above-asking price within days of being listed. For those who wanted to sell real estate in 2023, it was a great year to do so. While we likely won’t see the same unprecedented shift in 2022, market predictions show favorable improvements for those wanting to flip their freshly renovated real estate.
All in all, the market predictions favor buying real estate low and selling very high, capitalizing on the recent surge in selling prices and making the best investment possible. If you’re looking for fix and flip loans in 2022, you’ll be making a wise investment in the upcoming year.
What are Fix and Flip Loans?
For those in real estate, fixing and flipping homes is an incredibly lucrative option. With the right skills, knowledge, and professional assistance, you can multiply the price of a home within a year. However, starting the process of buying and investing in a home can be challenging due to the initial expenses. That’s where fix and flip loans come in.
With fix and flip loans, you borrow a short-term real estate loan that you must pay back within 12 to 18 months. You must spend the money to purchase real estate, finance renovations, and cover the overhead costs of upgrading real estate property.
Advantages of Fix and Flip Loans
The best advantage of fix and flip loans is that they are ideally suited for those interested in flipping real estate. These loans are short-term, quick to get, and not too risky for either the lender or borrower. Generally, with fix and flip loans, the property in question is collateral for the loan rather than any personal real estate.
Small business owners with previous experience in flipping houses will have the best success in securing these loans. However, first-time flippers can also benefit significantly from these loans if they have good credit and a sound business plan for their real estate. In fact, for small business owners looking to create a diversified portfolio, flipping real estate can go a long way.
Disadvantages of Fix and Flip Loans
While fix and flip loans are ideal for their suited purpose, new-time flippers should be aware of the potential downsides when purchasing new real estate. Costs such as mortgage, renovations, taxes, insurance, and utilities can add up quickly. Disaster may strike, and you’ll require a budget accommodating unforeseen events.
Additionally, good to excellent credit is required by lenders to ensure their security, and these loans have significant interest rates. Fortunately, if you’re a first-time flipper and need assistance in finding suitable loans for your venture, BitX Funding has you covered.
How do Fix and Flip Loans Compare to Construction and Traditional Home Loans?
Fix, and flip loans are a type of real estate loan. You must spend these loans on real estate purchases or renovations. However, selecting the correct type of real estate loan is vital for the property in question.
Traditional home loans are meant for improving and refurbishing an existing property, one in which you live or own as a rental property for other tenants. On the other hand, construction loans are designed for either razing existing property and/or raising new property on vacant real estate.
Another option for savvy business owners is to finance real estate with business credit cards. To compare these loans, let’s look at how they stack against each other.
Term
Fix, and flip loans are short-term, lasting only 12 to 36 months. Similarly, construction loans are short-term and last about a year, or the duration it takes to build real estate. Further, construction loans are typically paid out in draws rather than a lump sum. You get the money periodically and allot it to specific stages of the building process.
Alternately, traditional home loans are long-term, lasting decades. Home loans help homeowners pay off their new or existing real estate and should not be used to fix and flip alternate properties.
Interest
One of the downsides of fixed and flip loans is the interest rate, going as high as 12%. This rate accounts for the short-term risk associated with the lender. Home loans have very low-interest rates at 1%, corollary with the loan length.
Construction loans have variable interest rates, meaning the interest changes at each loan draw. However, interest rates on construction loans are typically slightly higher than their mortgage rates.
Down Payment
Due to the risks of purchasing and reselling real estate, you will need to put a down payment when going into a purchase. Lenders typically finance 80% of a property’s loan-to-value (LTV) ratio. When purchasing real estate, you’ll first need to pay to set an appraisal of the property. After this step, you’ll bring the remaining 20% of the LTV to the table to secure the property.
For example, if, after an initial appraisal, the value of the property is $100k, the lender will finance $80k, and the borrower will need to put in the remaining $20k. If %20 of the value sounds like a lot, there’s no need to worry because BitX Funding has you covered.
With a minimum credit score of 700 and at least $50k of verifiable personal income, we can help you finance your first fix and flip. BitX offers personal term loans for business purposes and has a lot of happy investment customers.
Collateral
Because of the loan length and risk to the lender, collateral for flip and construction loans involves the property in question. If anything happens during the reconstruction process and you can’t pay the loan, the lender liquidates the property.
Trending with its length and interest, home loans are very safe and involve a good credit score to get started. However, if the borrower cannot pay back the loan, they can seize the property.
Function
The loan function indicates the purpose for which you should use it. By now, you should know what kind of real estate project you wish to begin. Starting from scratch is the riskiest and most costly action.
Only those with experience in real estate should venture into building new property with a construction loan. Home loans are for personal real estate to live in and pay off over time.
Fix and flip loans are to renovate a property for resale. They are medium-risk loans with high-interest rates. A savvy small business owner can capitalize on real estate loans to make a profit.
Get Started with Fix and Flip Loans Today!
As a small business owner, understanding asset-based lending and the various credit facilities available to you is crucial for securing the necessary capital to boost your business. One option to consider is a revolving line of credit, which is based on the value of your company’s assets, such as accounts receivable and inventory. This type of loan, also known as an asset-based loan, allows you to access cash flow as needed, based on the borrowing base and advance rates determined by the lender.
Additionally, by utilizing this type of financing, you can free up working capital and access short-term funds to invest in your fix and flip real estate ventures. With the right knowledge and resources, asset-based lending can be a valuable tool for small business owners looking to take advantage of the strong real estate market in 2023.
For more information on a fix and flip investor loans, contact BitX Funding by phone, email, or by filling out the form below.
