Growing a successful mortgage brokerage business requires sacrifice, investment, and an adequate amount of blood, sweat, and tears–regardless of which phase of scaling your mortgage brokerage is in (sole broker, sole broker + processor, boutique firm, or corporate firm).
The 4 Phases of Mortgage Brokerage Growth
- Sole Broker: You’ve decided to venture out independently, with no loan processing solution
- Sole Broker + Processor: When your successes have enabled you to team up with a loan processor.
- Boutique Firm: You’ve built a team of multiple brokers with one or more loan processors.
- Corporate Firm: You now have at least 11+ brokers in your firm and are expanding.
The Market for Fix and Flip Investors
House flipping isn’t just a show on HGTV. It’s a savvy investment opportunity with plenty of upside for investors and lenders. In fact, in 2022, flipped homes accounted for 8.4% of all US home sales.
According to Attom Data Solutions, on average, fix and flip properties yield a 27.5% ROI. This translates to an average of $66,500 in profit. That’s more than double the average annual return from stock market investing!
With stabilizing interest rates and improving economic conditions, fix and flip houses for sale in 2024 are on an upward trajectory.
Success in house flipping hinges on speedy and flexible loan origination–something traditional consumer mortgage programs can’t offer. That is why most fix and flip investors turn to private mortgage brokers for business purpose loans.
Consumer Mortgages vs. Business Purpose Loans for Real Estate Investors
Consumer mortgages are traditional loans offered through banks for borrowers to purchase a property they intend to occupy. These loans are highly regulated with strict guidelines and oversight by the government and institutions like Fannie Mae and Freddie Mac.
Applying for a consumer mortgage can be a long process. These loans are difficult for investors to obtain and require good credit and a down payment.
Business purpose loans, on the contrary, fund the purchase and rehabilitation of investment properties that are non-owner occupied. Lenders face fewer regulations and little oversight. In fact, most states do not require a mortgage license to lend to real estate investors. Business purpose loans, like fix and flip financing, are much more flexible and accommodating to investors with less than stellar credit or who have money tied up in other properties.
Fix and Flip Financing Through Private Lenders
While business purpose loans are available through banks, they have strict conventional loan flipping rules. Fewer regulations and flexibility make private lenders’ fix and flip financing one of the best loans for flipping houses.
Let’s run through some of the benefits of fix and flip loans through private lenders:
Flexible Terms
Unlike stringent bank loans, private lenders have the flexibility to structure fix and flip loans for beginners or seasoned investors–even with low credit or a lack of liquidity.
Fast Approval
Quick loan approval processes allow investors to outpace their competition and capitalize on properties quickly.
Control Over Sale Price
A fix and flip loan can cover the construction, repair, and purchase of a property at lower interest rates, enabling investors to sell properties at lower prices while still turning a substantial profit.
Types of Properties
While traditional mortgages are for the purchase of occupied single-family homes, several types of properties qualify for fix and flip business loans, including:
- Non-owner occupied
- Attached or detached Single Family Rentals (SFR)
- 2 – 4 unit properties
- Townhomes
- Warrantable condos
No Prepayment Penalties
While traditional lenders penalize borrowers who pay off a loan before it matures, private lenders encourage quick repayment and eliminate pre-payment penalties for fix and flip investors.
Eligible for Low Credit Borrowers
Private mortgage brokers can structure fix and flip loans for beginners with low credit. And, in some cases, borrowers can access fix and flip loans with no money down.
Rather than obsessing over credit scores and down payments, private lenders take Loan-to-Value (LTV), Loan-to-Cost (LTC), and After-Repair-Value (ARV) into consideration when determining eligibility.
Metric
Description
LTV
Compares loan amount to property’s current market value
LTC
Compares loan amount to the estimated total project costs.
ARV
Projects the value of the property post-renovation.
Table Funding
While fix and flip loans enable quick scalability for private lenders, funding business purpose loans for real estate investors can be an expensive and risky venture. Many private mortgage brokers rely on table funding programs to mitigate risk while providing structure and reliability.
The private lending market used to be a Wild West of sorts, dominated by gung-ho entrepreneurs looking to raise capital in informal, non-institutional ways–like crowdfunding or approaching friends and family. These processes often came with minimal checks and balances and significant risks. That is until established capital providers like Roc Capital introduced structure, discipline, and benefits of institutional capital to the private lender sector through table funding programs.
Roc Capital’s White Label Table Funding program is designed to enable private lenders to simply focus on lending. Roc Capital’s team of professionals handles the loan underwriting process and, if approved, the funding. Best of all, Roc Capital operates entirely behind the scenes, enabling clients to maintain a level of privacy regarding capital and authority with their borrowers.
How Roc Capital’s White Label Table Funding Works
- The private lender identifies the investment property and the borrower–representing themselves as the lender to the borrower–and “brings the loan” to Roc Capital
- Roc Capital works behind the scenes, performing loan underwriting and overseeing the drafting of loan documents.
- If the loan is approved, Roc Capital wires the money directly to the borrower at the “closing table.” The private lender doesn’t need to contribute any money toward the closing.
With table funding programs like Roc Capital’s White Label Table Funding, where all funding and operational components are handled, private lenders save time while remaining balance-sheet-lite. This enables lenders to provide better service to their clients and allocate more funds to other aspects of the business.
Fix and Flip Financing: The Golden Egg For Mortgage Brokers
Fix and flip financing enables private lenders to outpace traditional mortgage providers and supply real estate investors with the speed and flexibility they need to beat the competition.
Less institutional oversight, higher LTV, LTC, and ARV considerations, and the overall nature of fix and flip projects, generate higher loan approval rates with shorter holding processes. The ability to provide clients with some of the best loans for flipping houses–with reliable and fast funding– helps build lasting relationships with opportunities to grow and scale.
Roc Capital: Simplified Fix & Flip Financing
Roc Capital offers the structure, expertise, and table funding necessary to elevate your mortgage business. Our fix and flip loan programs provide your customers with the most reliable funding source to purchase, renovate, and rent or sell homes.
Our fix and flip terms provide:
- Up to 100% of rehab budget financing
- Up to 90% LTC
- Up to 75% ARLTV
With streamlined, common-sense underwriting processes and expert relationship managers, Roc Capital provides the knowledge, tools, and capital to help you reap the benefits of fix and flip financing and scale your mortgage business.
Ready to elevate your mortgage business with Roc Capital? CLICK HERE to get started today.
