Though credit access is tighter compared with the no doc loans days that preceded the Great Recession, more investors are using mortgages to finance their house flipping. Financed flip purchases during the second quarter jumped 31% to $8.4 billion, per Attom Data Solutions, the highest level since the third quarter of 2006.
“It’s always smarter to use a mortgage because you get leverage, you can do many more deals, right?” said Vipin Motwani, an investor with Iron Gate Development in the Washington, D.C. market, which expects to flip about 15 houses this year. “Also the banks have become a little bit more easy in lending on this flip business. It used to be a lot tougher.”
Motwani usually goes to community banks, because larger banks, he says, are tougher to deal with, especially for self-employed investors.
“They’re going to try to fit you into a certain box, and If you don’t fit into that box, then they’re not going to give you the financing,” he said. “What they’re looking for is the W2 wage earner, for somebody who has consistent income from an easily sourced job, for example, they can verify your income, they can know you’re good for the loan.”
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