How Are Hard Money Loans Calculated for “Fix and Flip”?

With fix and flips gaining popularity, you might be looking for effective ways to finance your project. A hard money loan might be a great option for you because it lets you raise the money you need for the purchase quickly.

In this blog, we will walk you through the process of how hard money loans are calculated for fix and flips.

What Is “Fix and Flip”?

“Fix and flip” is an investment strategy when an investor buys property with the intention to improve it and resell it later at a higher cost.

What Are Hard Money Loans?

As we’ve discussed in the previous blog, a hard money loan is a short-term loan where the property that is being purchased works as collateral rather than a buyer’s credit score. Hard money loans are typically issued for a short period of time with 12 months being the most common duration.

At GW Private Lending, we offer loans for a period of time between 6 to 12 months. However, if you need a longer-term loan, we can discuss it as well.

How Is the Loan Calculated?

When hard money loans are calculated, usually the answers to the following questions are taken into consideration:

  • What is the purchase price?
  • What is the repair cost estimate?
  • What is the after-repair value (ARV)?

At GW Private Lending, we offer loans between 80 to 90% of the purchase price.

Further, the interest rates usually depend on the Loan-to-Value (LTV) ratio, which is the ratio of the loan amount to the value of the property being used as collateral for the loan. Our interest rates are in the 8 to 9% range, which might be higher if you put less money down.

When applying for a loan for a flip and fix, it is important to accurately estimate the repair costs and price the property correctly to ensure that you can sell it during the established timeline.

Should You Invest in “Fix and Flip”?

As more people are moving into urban areas, “fix and flip” when done right might be an incredible investment opportunity. If you do not have experience with this investment strategy, we would be more than happy to walk you through the whole process and such details as our interest rates.

With decades of experience lending money to local flippers, GW Private Lending is a hard money lender you can trust in California. We provide more competitive interest rates and terms than traditional lenders. So, if you are thinking about investing in a “fix and flip”, contact us for expert advice.

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