2007-03-02 08:53:28 · 5 answers · asked by mmoroles 1 in Business & Finance ➔ Renting & Real Estate
If you know what you are doing (have a good crew of contractors lined up, have a good idea of the current property turnover rates, are buying at no more than 70% before repair costs, have reserves sufficient to cover ALL the holding costs and repairs for the entire period of rehab and sale + 3 months, get the picture?), then you should get the cheapest payment loan, which will generally be some ARM product...the lowest you will get is usually at about 3 years, so you should NOT be worried about having the ARM part kick in, despite what that moron pushing the Dave Ramsey site is saying...no flip should really take any more than 1 year. If you cannot afford the rehab costs, you will generally have to get 'Hard money'...which is private lending which is more driven by the value of the property than the ceredentials of the borrower, which means you have to have a pretty good deal on your hands. These guys will generally lend the purchase price and repairs at 12-20% with ten origination points, so the key is to get in and out quickly. The best source, however, if you can handle the payments is a home equity line of some kind...it has no costs to borrow outside the interest rate, and generally has a lower rate than most hard money loans. Again, however, I would never borrow to try a flip unless you know what you are doing and have a solid REALISTIC plan.
2007-03-04 06:44:32 · answer #1 · answered by jsullymaan 3 · 0⤊ 0⤋
An optional arm loan with no pre-payment penalty is the best. There rates start at 1.75% however your balance grows every month. If you plan on reselling in a short period of time without alot of money coming out of your pocket then this is a great loan. You just have to purchase at the right price.
2007-03-02 11:18:03 · answer #2 · answered by tianaramal 4 · 0⤊ 0⤋
Whatever type of loan that will give you the lowest interest. Why pay extra in interest if you are planning on flipping it? Just hope that it sells because the market is slower than usual. Good luck!
2007-03-02 09:01:24 · answer #3 · answered by seeso 3 · 0⤊ 1⤋
The best option is to NOT borrow for a freaking investment property. You always have the possibility of losing your butt when you do that. However, if you are dumb enough to go into debt for an investment property, do NOT get an ARM. You are inviting disaster. IF for any reason you cannot sell the house when you want for what you want, you may end up stuck w/ it when the "adjusting" begins. As if on cue, your company will lay you off, your wife will leave you & your dog will die! It's called Murphy's law - DUH! If you insist on getting a mortgage for this, get as small of one as you can on a FIXED rate.
The website below is a financial guy who used to flip houses using debt. He went bankrupt, so don't think it can't happen to you. He is a debt-freedom guru now & one of my personal heroes when it comes to money. You are not Donald Trump. If you land hard, you will not "bounce back" & get your own t.v. show...You will go "SPLAT!"
2007-03-02 09:05:49 · answer #4 · answered by Tom's Mom 4 · 0⤊ 3⤋
An ARM loan.
2007-03-02 08:58:21 · answer #5 · answered by Akbar B 6 · 0⤊ 1⤋