Helping real estate investors find loans sometimes requires a little creativity. Many conventional lenders do not (or cannot) offer loans for certain types of real estate, including homes that are not the borrower’s primary residence. Whether the condition of the property doesn’t meet their requirements or the borrower does not meet certain criteria, it can be difficult to get a conventional mortgage for an investment property. Construction loans are also not usually a good fit for flippers because they are designed for new construction, not renovations.

When borrowing from a traditional lender isn’t an option, you can still help your clients find financing. Depending on the situation, a hard money fix-and-flip lender could be the solution.

How to Know When Your Clients Need a Fix-and-Flip Lender

Even if the majority of the loans you broker are through traditional banks, it’s a good idea to have other solutions in your back pocket. If you have clients dealing with any of the scenarios below, it might make sense to refer them to a hard money fix-and-flip lender

Multiple Properties

Clients that plan to invest in multiple properties can’t always get a traditional mortgage. Conventional lenders are limited to financing a maximum of 10 properties per borrower, which includes principal residences. The borrower’s debt-to-income (DTI) ratio may also prevent them from securing traditional financing. Depending on the type of loan and the borrower’s credit score, they may need a DTI as low as 36 percent. 

Fix-and-flip lenders have no limit on the number of properties they will finance and are more lenient about DTI ratios, as long as the borrower has sufficient equity. Real estate investors that want to start new flips while others are in progress will need to find a lender that will work with them.

Poor Property Conditions

Conventional lenders require properties to meet certain criteria. A fix-and-flip lender doesn’t have the same limitations as a traditional bank. The whole point of a flip is to improve the property enough to make a profit on reselling it, so many ideal flips don’t meet bank requirements. When your clients work with a fix-and-flip lender, it gives them more flexibility to purchase foreclosures and other homes that have fallen into disrepair.

Limited Cash on Hand

Fix-and-flips require an investment in improvements, and not everybody has enough cash for this kind of significant investment. A fix-and-flip lender provides financing for the purchase of the home and a percentage of the improvements. Keep in mind that fix-and-flip lenders do require borrowers to contribute some cash.

Low Experience Level

Experienced flippers may occasionally be able to secure financing through a conventional lender, but this is rare. First-time flippers and those who don’t have an established relationship with a traditional bank will need to find another source of financing. Fix-and-flip lenders reduce their risk by using the property as collateral, which allows them to be more flexible with less experienced flippers. Even if a borrower has never flipped a home before, you can help them get a loan.


Offer Flexible Loan Options with Socotra Capital

Socotra Capital is a hard money lender that finances fix-and-flips, residential rehabs, buy-and-holds, and other types of loans for real estate investors. If you have clients who are curious about first-time flipping or looking to expand their portfolios, you can offer them solutions beyond conventional lending. 

In addition to offering flexible financing solutions, hard money lenders are able to operate much faster than traditional banks. Instead of closing in 30 days, your clients could be finalizing deals in just five days. This gives them an advantage in the competitive world of flipping. 

Read Hard Money 101: A Guide for Real Estate Agents, Mortgage Bankers, and Commercial Brokers to learn more about the benefits of building a relationship with a hard money lender.

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