If you’re business-minded and looking for fun, creative ways to make money, property flipping likely has a lot of appeal. You can turn undervalued properties into high-value assets within a relatively short time, and the process is nothing short of addictive.
Once you’ve completed your first flip, you want to keep the ball rolling. But unless you have cash set aside, your next move will depend entirely on how quickly you can get funded. Which leads to the question: What funding options do you have?
Keep reading for a practical guide to how you can fund your next renovation or resale project without slowing down.
1. Use a Bridging Loan
If time is of the essence, bridging finance is probably going to be the best solution for you. This option, which you can get from most hard money lenders, will get you into a property before you’ve even sold your current one.
Bridging loans give you short-term access to funds, usually within just a few days, so you can move fast if you’ve got your eye on an auction property or a distressed property receiving a lot of interest. The caveat is that these loans come with higher interest rates, so you need a clear plan when it comes to repaying the loan, usually through resale or long-term refinancing.
2. Refinance Your Existing Property
If you’ve just flipped a home and built up equity, another funding option to consider for your next property is refinancing. This can give you the cash you need to start again, but it’s not ideal for all situations.
Generally, property refinancing works well if your first project went to plan and the new value supports a good loan-to-value ratio. It can also be a good option if you want to keep the flipped property as a rental but still extract some of its value.
3. Find a Joint Venture Partner
If you’ve got the skills but not the cash, look for someone who has the cash but not necessarily the skills, so you can work on your next project as a joint venture.
In this case, you can split your responsibilities. For instance, you might source the project and bring the know-how, while your partner brings the money. You’ll split the profits, but keep in mind that you also split the risk and responsibility. Make sure you can fully trust your partner, and agree on everything in writing before you start.
4. Consider Auction Finance
Buying properties at auction gives you the advantage of speed, but only with the right financing. Given that with most auction purchases, you usually have 28 days or less to complete, it’s no good trying to get a traditional mortgage, which can take months to approve.
Instead, look for a lender that specialises in auction finance, offering loans that are structured to complete fast, suiting the quick turnaround for auction conditions.
Final Thoughts
Flipping a property relies just as much on timing as it does on design and renovation work. That’s why having a solid plan in place for funding is so important: so you can pounce whenever the opportunity arises.
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