What is a Fix and Flip Loan?
- 9 to 12 month financing
- 10% – 20% Min. down payment
- Funds for purchasing and/or repairing
- No income documentation
- Usually no prepayment penalty
- Rates from 9% to 13%
- Fair Credit
- Money disbursed in draws called a “Holdback Process”
A Fix and Flip Loan is also known as a rehab loan. It is becoming a more and more common form of real estate investing. Fix and flip projects involve purchasing properties, making repairs and upgrades to make them more appealing to potential buyers, and then selling them. The goal is to increase the market value of the property with the minimal expense possible so that the home can be resold for profit. This process is usually completed within a 6 to 12 month time period. Many traditional banks won’t lend for such a short term. That is where ARC Capital comes in. We have investors that are will to get you the short term financing you need to complete your fix and flip project.
How Does The Construction Holdback Process Work?
The key to a successful fix and flip is planning and organization as well as understanding how the process works. A key component is knowing how a holdback works. Understanding how a construction holdback or draw process works can help you complete your project more efficiently and more cost effectively.
When you get your loan for your new fix and flip project the lender holds back funding the balance of the loan, which is called a construction holdback. The lender then makes payments, or disbursements, contingent on completion of key phases of construction; this is called a draw schedule.
The typical turnaround time for holdback disbursements is 24-48 hours from receipt of all documentation required for processing. The disbursements are made only for installed materials and completed labor.
It is not uncommon for a lender to not advance funds for material that has not been installed or construction that has not been performed. Many lenders require an inspection or proof of completion. There is usually an administrative fee that is charged for each draw to pay the cost of managing the draw and holdback process.
Having your draw schedule mapped out will help keep you organized and keep your project on schedule!
How Do you Fix and Flip a Property?
There are several steps that you need to take to start your Fix and Flip investment. Here is a quick breakdown of the steps taken to Fix and Flip a property:
- Find a property that needs repairs and/or upgrades that is in distress or outdated such as an REO, foreclosure, damaged from fire, water or something similar.
- Secure a short term loan from ARC Capital to cover a portion of the purchase, and a portion of the estimated cost of repairs and/or improvements.
- Make the necessary repairs and/or improvements on the the property.
- Put the property on the market for sale for more than it cost to buy and fix it.
- Find a buyer, sell the property.
- Payoff the Fix and Flip Loan, make a profit.
- Start the Fix and Flip process again.
*We offer Fix and Flip Loans in the following states: California, Colorado, Connecticut, Florida, Georgia, Illinois, Maryland, Michigan, Missouri, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia.