Alpha Funding Partners specializes in Fix & Flip investments for the real estate investor. All loans include financing for purchase as well as 100% of the construction funds to renovate the property.
Alpha Funding Partners specializes in Fix & Flip investments for the real estate investor. All loans include financing for purchase as well as 100% of the construction funds to renovate the property.
$700 Million in Loans to Fuel Successful Real Estate Projects.
Real estate investors have a plethora of options when it comes to financing their next project. When faced with the decision between opting for a conventional mortgage loan from a bank and a hard money loan, it’s important to keep a few key points in mind. A couple ideal financing methods for investors focused on fix and flip properties are 203K loans and hard money loans. The distinction between the two is that a 203K loan is a conventional mortgage loan package that is backed by the FHA and is geared towards flippers specializing in rehab or construction projects.
Alternatively, a hard money fix and flip loan is backed by a private lender as opposed to a bank. Typically, a 203K loan carries a 30-year term with an average APR ranging from 3.3% to 3.8 and as many as 2.5 points owed to the lender to cover origination costs. Investors are generally required to provide a minimum down payment of 3.5% of the aggregated cost. Still, there are certain restrictions when it comes to the category of renovation projects the funds can be used for as well as a cap on the dollar amount of the attainable loan.
When working with a fix and flip hard money lender like Alpha Funding, investors usually need to provide more capital up front to devote to the project. Typically, a hard money fix and flip loan will finance between 80% to 85% of the overall project cost, which means the investor will have to cover the remaining 15%-20% up front. Interest rates can vary but are usually around 8% to 12% with origination points running between 0% to 3%.
The terms of hard money loans are relatively short and are specifically tailored for fix and flip projects with clearly defined timelines. When compared to 203K loans, hard money lenders are considerably more flexible regarding the loan approval metrics and underwriting policies as well as having the ability to close the lending process in a fraction of the time it takes conventional banks to.
Fix and flip loan amounts are determined by comparing the current valuation of the property with its anticipated market value after the completion of all planned rehabilitation projects—which is referred to as the “After Repair Value” (ARV). A hard money loan is an ideal financing method for real estate investors because the approval criteria is mainly focused on the property and the viability of the project and not on the credit score of the individual seeking the loan. That is not the case when it comes to 203K loans, which typically require at least a 640-credit score and mandate that a minimum of $35,000 in renovations be completed.
For hard money loans, there is generally never a set amount of rehab costs that must be completed. Further, investors opting for a hard money fix and flip loan can work with any licensed contractor of their choosing—whereas with a 203K loan, investors are stuck with contractors that have been pre-approved by the lending bank. What’s more, arguably the most attractive aspect of hard money loans is the fact that a lender like Alpha Funding can usually close in a matter of days. Banks offering conventional mortgages usually take a minimum of two months to close. In the highly competitive real estate investment industry time is a valuable commodity, making hard money loans a great option when it comes to funding your next project.
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