The Short Answer
When it comes to real estate investing, securing the right financing can make or break a fix-and-flip project. For investors looking to leverage other people’s money (OPM) without putting down their own capital, 100% fix-and-flip loans might seem like an ideal solution. These loans cover the entire purchase and renovation costs, allowing investors to focus solely on the project. However, they come with challenges such as high interest rates, stringent lender requirements, and limited availability, particularly for those with less experience or lower credit scores.
In this article, we delve into the specifics of 100% fix-and-flip loans, highlighting lenders like Next Financing, Residential Capital Partners, and Rehab Financial who offer these products under certain conditions. We also explore alternative financing options, including partnering with co-borrowers or business partners, using home equity loans, or seeking hard money loans and crowdfunding opportunities, which can provide the necessary funding with potentially fewer risks and more flexible terms.
Then it’s also worth clarifying that standard fix-and-flip loans are much more common, the borrower requirements are far less stringent, and you can still get excellent leverage. For instance, New Silver Lending currently offers borrowers up to 90% LTC, which vastly reduces how the required down payment.
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When it comes to real estate investing, financing is the key element to the success of a project. Finding the right funding can be the difference between a very successful deal and one that isn’t as profitable. For some real estate investors, putting down any money for a fix and flip deal is not possible, and in this case a specific type of financing is required. This financing is called 100% fix and flip loans, where investors can do fix and flip deals using other people’s money (OPM) entirely.
Some lenders offer 100% fix and flip real estate investment loans for these investors with the following features:
- 100% of the purchase price: The loans will fund the entire amount that is required to purchase the property, and in some cases the renovations and down payment as well.
- Short term loans: Geared for fix and flip projects, these loans are short in duration, typically ranging from 6 months to 18 months.
- No down payment: The most appealing aspect is that investors can finance both the purchase and renovation without putting any of their own money down.
- Higher interest rates: In comparison to traditional loans, 100% fix and flip loans have higher interest rates, in order to mitigate the risks associated with this type of loan for the lender.
- Experience required: Lenders that provide 100% fix and flip loans often require solid experience in fix and flip projects for those who are taking out a loan.
- Property types: These loans are typically used for single-family homes, but can be used for multi-family units, depending on the lender.
Are There Any Lenders That Offer 100% Fix And Flip Loans?
Finding a lender who provides 100% fix and flip real estate investment loans may take some time and research, so we’ve put together a brief list of a few lenders who offer these loans.
Lender 1: Next Financing
Next Financing is a financing option for investors who don’t have a lot of experience. They offer loans which cover 100% of purchase funds, rehab funds, and closing costs for qualified investors with at least 4+ verifiable flips in the last 3 years. Essentially, everything except the interest is financed. No income or tax return verification is required, and only 2 months of bank statements are required to show liquidity, with a minimum credit score of 680.
Next Financing provides loans in all 50 states across the country, and the experience requirement isn’t as high as many other lenders. Which makes this lender a preferable option for those who have begun their journey in the fix and flip realm, but haven’t completed an extensive amount of flips necessarily.
| Loan Term | 12 months |
| ARV | 75% |
| Minimum credit score | 680+ |
| Minimum loan amount | $100,000 |
| Reserves | 3 months |
| Closing time | 2-3 weeks |
Lender 2: Residential Capital Partners
Residential Capital Partners offers fast, no-money down loans from $75,000 to $1,250,000. Geared for townhomes and condo’s, these loans offer 100% financing for business entities that are doing fix and flip projects. The lender highlights their ability to provide fast funding, with customized loan terms for each project. These loans are offered for single-family homes, or 1-4 unit residential properties.
| Loan term | 9 months |
| Loan amount | $75,000 - $1.25 million |
| ARV | 65%, 70% or 75% |
| Closing time | Within 14 days |
Lender 3: Rehab Financial
Rehab Financial Group provide 100% fix and flip financing for flippers with a credit score of 620 or more, and a verifiable income or cash flow. These home rehab loans provide 100% of the purchase amount, as well as the rehab costs, which is suited to fix and flip projects. However, all closing costs, as well as 3- to 6-month interest and 15% rehab budget reserve must be available in order to qualify for this loan.
| Loan term | 8 to 12 months |
| Loan amount | $100,000 - $1.5million |
| ARV | Up to 75% of ARV |
| Minimum credit score | 650 |
| Closing time | 14 days or less |
Why Are 100% Fix And Flip Lenders So Hard To Find?
If you’re trying to find lenders that provide 100% fix and flip loans, you may have some difficulty and this is why:
- High risk for lenders: Borrowers will have no skin in the game, and sometimes this can lead to lower motivation to make the project a success. Lenders typically prefer borrowers who have some personal investment in a project as this is more likely to ensure that they are invested in its success. Lenders bear the risk of the property not selling or the market changing.
- Borrowers can become overleveraged: With access to 100% financing, borrowers can become overleveraged by taking on more projects than they can manage. This means that risk of these projects failing is higher, and if they fail, borrowers are more likely to default on their loans which is a problem for lenders.
- Strict regulations: In some regions, there are regulatory constraints that make it difficult for lenders to offer 100% financing. Stricter lending laws and regulations are designed to prevent risky lending practices that could lead to financial crises.
- Underwriting challenges: The After-Repair Value (ARV) of a property can be difficult to determine, and if the property doesn’t match the expected value once its complete, this can be costly for the lender. Along with this, renovations can easily run over budget go over the expected timeline, which can impact the overall success of the project and the borrower’s ability to pay back the loan.
Is It Realistic To Get a 100% Fix And Flip Loan With Bad Credit?
It’s not realistic to get a 100% fix and flip loan with bad credit for a number of reasons.
- Limited loan options: For borrowers with bad credit, there aren’t many loan programs. Most loans require a credit score of 620 or more, which means that lenders who don’t have this requirement could be unreliable or offer unfavorable loan terms.
- Default risk: Borrowers with bad credit typically have a history of financial difficulties and may not have a financial cushion to fall back on. Which means that any unexpected delays or issues with the project could lead to cash flow problems and an inability to pay back the loan. If you default on repayments within loan programs, the lender can repossess your property and take it back.
- Problems with future financing: If the project doesn’t go as planned and you cannot make payments, your credit score could get even worse, and this would make securing financing in the future extremely difficult and in some cases almost impossible. So, the pressure and risk for these projects to work is very high.
- Market fluctuations can derail projects: Any changes in the market can leave borrowers who have a 100% fix and flip loan in trouble, because they won’t have the financial stability and cushion to withstand these changes.
Alternative Ways To Secure 100% Funding For A Fix And Flip Project
Real estate investors who need 100% financing for their fix and flip projects but don’t want to use a 100% fix and flip loan have other options. Here are a few alternative ways to get the funding needed:
Home Equity Loans
Home equity loans allow people to access the equity in their homes by borrowing a lump sum of money. A home equity loan is a second mortgage, which will have a its own terms and rates, over a fixed period of time. This means that two mortgage payments will need to be made each month.
The main benefits of a home equity loan are that it is cheaper than a personal loan and comes with a fixed rate so borrowers can budget around a fixed amount. These loans also have lower interest rates than credit cards, which means that they are more affordable over the long term.
Co-Borrower or Business Partner
Using a co-borrower is a popular approach to bring in a co-borrower or business partner who has a stronger financial profile or more experience, which can help secure better loan terms and share the investment risk. By pooling resources, both parties can contribute capital, reducing the need for full financing while also leveraging each other’s expertise.
On this point, it is worth noting that New Silver’s fix-and-flip loans give you the option to add a c0-borrower during the online application process.
Hard money loans
Hard money loans are provided by private lenders and these can provide 90%-100% of the financing required for a fix and flip project. Hard money loans can be a good solution for those looking for 100% financing from a reliable source. Hard money loans are usually short-term, with a higher interest rate.
Crowdfunding
Crowdfunding has grown in popularity in a big way over the last few years. Real estate investors can get 100% of their project funded through crowdfunding, which is a large group of people online who have pooled their funds to provide a financial solution for purchasing real estate. This funding can include the purchase price, renovation costs, down payment and closing costs.
Private money lenders
Private money lenders are another alternative for those looking for 100% financing for a fix and flip project. These loans are provided by an individual or company that has the means to lend money, and the loan terms are therefore flexible.
FAQ
Securing financing for fix-and-flip projects doesn’t have to be a daunting ordeal. Here’s a streamlined guide to understanding how the loan application process typically works:
Step 1: Pre-Qualification
Start by getting pre-qualified online. This usually involves a soft credit check, so you won’t have to worry about affecting your credit score. Pre-qualification helps establish your borrowing power, giving you the confidence to negotiate and make offers that rival cash buyers. Most platforms offer a tool to input basic property details and receive an estimated loan amount and terms.
Step 2: Connect with a Loan Advisor
Once you’ve zeroed in on a property, it’s time to consult with your preferred fix-and-flip lender. They bring a wealth of experience and can provide insight into maximizing your investment. During this stage, you review critical numbers, ensuring both the deal and the loan align with your financial goals.
Step 3: Submit the Formal Application
Satisfied with the terms? It’s time to proceed with the formal application. Most lenders eliminate upfront costs and application fees, easing financial pressure at the outset. You’ll need to supply detailed information about the property and your renovation plan. This step solidifies your intent and moves you closer to acquiring the necessary funds.
This straightforward, three-step process empowers you to secure the funding needed to transform properties successfully. With thorough preparation and informed choices, you can navigate the fix-and-flip loan landscape efficiently.
To begin the journey of securing a fix-and-flip loan, you can start by getting pre-qualified online. This process is straightforward and involves a few key steps:
Soft Credit Check: Initially, you’ll undergo a soft credit pull. This type of inquiry doesn’t impact your credit score, yet it provides enough information for lenders to assess your financial standing.
Input Property Details: Enter the address of the property you’re interested in purchasing. This allows the platform to evaluate critical factors such as the home’s size, location, and condition.
Technology Evaluation: Advanced online calculators will use the details provided to analyze current real estate trends and market conditions. This assessment helps pinpoint the most competitive pricing for your loan.
By completing these steps, you can confidently position yourself to make attractive offers, rivaling those of cash buyers. Being pre-qualified gives you a strategic advantage in a competitive market, ensuring you’re ready to secure an exceptional deal when the opportunity arises.
Understanding the fee structure and any associated penalties is crucial for financial planning. Typically, these loans feature competitive fees designed to align with the demands of real estate investors.
Most Important Fees To Be Aware Of:
- Loan Origination Fees: Usually a percentage of the total loan amount, covering the cost of processing your application.
- Interest Rates: Often variable and contingent on market conditions, these rates are an integral part of the loan costs.
- Closing Costs: May include legal fees, appraisal fees, and other expenses tied to finalizing the loan.
A significant advantage is the lack of prepayment penalties. This means investors can pay off their loans early without incurring additional costs, facilitating better financial flexibility and potential savings on interest.
By selecting loans with these transparent conditions, investors can better predict their return on investment and ensure smoother project completion.
Typically, loans for these projects can be finalized in just 7 to 10 business days. This rapid turnaround allows investors to stay competitive, especially when competing with cash buyers in a hot real estate market.
Steps to Expedite the Loan Process:
- Prepare Documentation: Ensure your financial documents are ready, including credit reports and project plans.
- Work with Experienced Lenders: Some lenders specialize in fast-tracking these types of loans, understanding the urgency involved.
- Clear Communication: Maintain open lines of communication with your lender to address any concerns promptly.
By following these steps, you can secure funding quickly and focus on turning properties into profitable ventures.
