What’s the best way to finance a real estate investment loan?
I’m planning to “flip” a house in the midwest, but I’m not sure how to go about financing. I plan to purchase the house for $130k, spend $20k in repairs, and sell for $160k. I would need to finance the purchase and repairs.
1) I don’t know what type of loan to go with
2) I don’t know if it’s better to go to a bank, like National City, a financing company, like CitiFinancial, or a different type of company…
You need to re-think your numbers a little. If you finance a $130K loan, the cost is going to be several thousand dollars. You are talking about a high risk loan so expect to pay a few points at closing also, if you can get a loan. Check with all of the above until you find a mortgage broker that you are comfortable working with. However, this property in particular may not be well suited for a rehab. If there is only a $10K spread on a $150K investment, I would be extremely careful. You need to consider ALL of the costs. How will you sell the property? What if it doesn’t sell right away? The loan service on a $130K loan will be $1,000 per month or more (depending on taxes and insurance). If you sell the house quickly, say 4 months to rehab and flip, that would be $4,000 of your projected $10K profit. What if it takes an additional 6 months to sell?
Best of luck to you.
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