Project Description

Fix & Flip Property Investment Lending Programs | Vintage Real Estate Fund, SLC Utah Lender

FIX & FLIP ‘REHAB’ PROPERTY LOANS

Fix and flip loans are private, short-term loans used by real estate investors to purchase homes with the intention of rehabbing or “flipping” the home to then resell it for a profit.

The loan is typically secured by the actual property and may or may not include the rehab costs. They are typically used for fix and flips because private investors will loan more than a bank; most banks do not like to loan on these types of properties and will only loan on the current value, whereas a private lender will loan based on the After-Repair Value (ARV).

This loan is also used by more experienced investors who undertake multiple projects simultaneously, with the intention to Diversify & Leverage Funds.

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FIX & FLIP 'REHAB' PROPERTIES
Let’s say you want to purchase a property with the intention to fix it up and then flip it for a profit.
The home is expected to cost $220,000 and the costs to repair it are estimated to be $30,000. That is a total cost of $250,000.
The home’s After Repair Value (AVR) is projected to be $300,000. If you contribute $50,000 of your own money and get a private loan for the remaining $200,000, plus the additional costs of the loan, you will be looking at an estimated $270,000 in total costs.
Once the project is finished, if all the projected calculations of costs and sales price are correct and accounting for repaying the loan, you should see a net profit of about $30,000, an ROI of 60%.

Experienced flippers use private loans to fund multiple projects simultaneously. This allows them to leverage their returns and grow their businesses at a much faster rate.

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Compare outcome of 2 Alternatively Funded Real Estate Investments:
DEAL #1 Funding an investment project : ALL CASH
DEAL #2 Funding an investment project : PARTIAL CASH + PARTIAL PRIVATE MONEY LOAN

See how utilizing private money loans allow the borrower to diversify their funds & risk allowing their returns to potentially multiply:

DEAL #1: ALL CASH INVESTMENT


Your flip is expected to cost $200,000 with the purchase price and rehab combined.
You use your personal $200,000 in cash and fund the rehab yourself.
If you can sell the house for the projected ‘After Repair Value’ (ARV) of $250,000, you will profit $50,000 on your $200,000 investment.
This gives you a 25% profit margin.


CONCLUSION:
You can take your $200,000 and tie it all up in one all-cash flip at a time:
$200,000 = $200,000 project x 1 project
= $50,000 profit
(Flip Time / ROI Time = 6-8 months)

DEAL #2: PARTIAL CASH + PARTIAL PML (PRIVATE MONEY LOAN)


Your flip is expected to cost $200,000 with the purchase price and rehab combined.
You use your personal investment of $50,000 in cash + private money loan for $150,000.
With the loan fees added in, your new projected costs will increase from $200,000 to $215,000.
If the house sells for the projected ARV of $250,000, after repaying the private money loan, you will profit $35,000.
However, since you only invested $50,000 of your own cash (instead of $200,000), your Return on Investment (ROI) is 70%!
**That’s almost 3 times more than you’d make in the same deal using all cash.


CONCLUSION:
You can use that same money and have 4 projects going simultaneously using private money loans:
$200,000 Investment = $50,000/project X 4 projects
= $35,000 profit/project x 4 projects
= $140,000
(Flip Time / ROI Time = 6-8 months)

**If you profit $35,000 on each of the flips, you’ve just made $140,000 in the same amount of time that you would have made $50,000 in the all-cash flip!