Can’t find your dream home? Have you thought about transforming your current home into your dream home? There are many ways that you can make flipping your home in Orange County affordable so that creating your dream home will not put you in debt. Here are eight methods you can use to help you finance flipping your home.
1. Family and Friend Loans.
Having a large network a large number of personal connections is a great bonus when it comes to flipping a home. Individuals from your network connections as well as your personal connections can assist in helping you gather enough funds for a house flipping project.
This type of loan is great for first-time and experienced flippers with family members, friends, or acquaintances who want to invest in real estate. If you decide to utilize family and friend loans, make sure to have all loan agreements written into a contract and signed by both parties to protect both parties as well as having a physical record of the agreement on hand. The agreement should overall follow all IRS laws and securities laws that apply to family investments and the record should specify the interest rate and the time that it will take to pay back the loan.
2. Hard Money Loan
Hard money loans are short-term loans intended for real estate investments and issued by private lenders. This type of loan is intended to help with your funds until the end of the project. A lender for this type of loan can either be an individual, a group of investors, or a licensed mortgage broker who uses personal funds.
This type of loan is great for borrowers with struggling credit and borrowers who don’t have other financing strategies. A great bonus for this type of loan is that the lenders have lower qualification requirements, which means your home flipping project can be approved in just 1 to 2 weeks.
3. Home Equity Line of Credit (HELOC)
A home equity line of credit loan involves tapping into the equity of your home, which gives you access to a certain amount of money that you can draw as needed and pay back with interest on only the amount you used. The equity of your home is the difference between the market value of your home and your mortgage balance.
This type of loan is great for homeowners who have at least 20% equity in their home and have good credit to ensure that both mortgage payments and paying off the home equity line of credit loan is affordable. What’s great about this type of loan is that most banks will allow you to borrow up to 85% of the value your home to help fund your home flipping project.
Crowdfunding involves creating a project that raises small amounts of money from a large group of individuals. This is usually done via the internet. Crowdfunding is great for funding large projects such as a house flip. Individuals who assist in your finances supply a percentage of your loan and earn interest for the money they put in.
There are many companies out there that can help support your crowdfunding, including some that can quickly close your loan using its own money while it waits for investors to put up the funding. Although this a great way to get ahold of enough funds, it may not be ideal if you want to get started on your home flipping project in a short period of time.
5. Using Funds in Your 401(k)
This financing method involves taking a loan or withdrawing funds from your 401(k) account to finance the home flipping project. Most 401(k) accounts allow you to take a loan of up to 50% of your account balance. This type of loan is great if you have a lot of retirement savings through a 401(k), but not ideal if you are close to retirement age. If you are not close to retirement age, the rewards may outweigh the risks. Since this is still a loan, you would still pay interest on the loan, but the money is yours, which is equivalent to paying back the principal and interest to yourself.
Instead of dreaming about living in the perfect home, why not make your dream home into a reality? It can be possible with a little research, some strategic financing, and help from a local loan officer to start the process in the right direction. If you have any questions, contact the Kolesar Team today!
Courtesy of Cuselleration
Photo Credit: Shutterstock/Dean Drobot