When you think of the word “entrepreneurship,” you’re probably thinking of a business owner who’s going to buy property to act as a landlord, maybe become a restaurant owner, tech startup, ecommerce, or even retail. Not many people immediately think of house flipping specifically when it comes to becoming an entrepreneur. Speaking of which, while some ventures are a little easier to start up thanks to low barriers to entry, such as financing, it’s actually quite the opposite when it comes to certain ventures like real estate.
Specifically, if you don’t have your own money upfront for something such as house flipping and you’re a beginner, then it can become far more difficult to truly invest. So, with all of that said, how can you finance your dream of having a house-flipping business? Is this something an idea that needs to be left in the dust? Absolutely not! So, here’s everything you need to know to finance your own house-flipping venture!
So, before you can start driving around and hunting for houses that scream “potential,” you seriously need to take a good, hard look at what’s even going to be possible. Sadly, there’s always going to be a chance that this venture can’t happen, and it’s solely going to be due to your financial situation.
You’ll need to take stock of your savings, assets, and credit score. In general, you absolutely need to keep in mind that a strong financial foundation is needed, no “buts” about it; this will not only make it easier to secure financing but also provide a clearer picture of your budget for potential property acquisitions and renovations. If you lack the funds or a strong foundation, then it’s going to be harder to secure the funding.
While you can’t bring this business idea to ANGEL investors, you can still look into other ways to potentially get funding more traditionally. So, these can include bank loans and mortgages, which are fairly common routes people go for when it comes to their house-flipping project.
Ideally, before you start any of this, you’ll have to ensure your credit score is in good standing; plus, there’s a pretty high chance that you’ll need to be prepared to provide a solid business plan, too. For the most part, there are lower interest rates if you go this route, so that’s a plus.
Honestly, hard money loans will most likely be your best bet since these directly cater to this business venture, and there’s just significantly more leeway with this, too. So, what are these? Well, these are short-term, asset-based loans that are specifically designed for real estate investments.
While traditional loans will make you shoot through hoops, you don’t have to worry as much about this with hard money loans. These loans are secured by the property itself, making them more accessible for individuals with less-than-perfect credit. Essentially, you’re getting more opportunities if you go this route than the traditional route for getting a loan.