The process for obtaining a loan if you invest in properties, fix them up, and then sell them for a profit is a bit different than other business loans. However, there are some similarities, and one is that you will likely have to supply several types of documentation to the lender. Before offering a loan on a fix-and-flip property, the lender will want to make sure the loan is not that big of a risk. Therefore, there are certain types of documentation that they will want to see. Here is a short list of the documents you may be asked to provide during the application process. 

A document that shows the construction budget will be requested. 

A construction budget shows the lender how much money you will be investing in the property to fix it on top of what you are requesting to pay for the property itself. This document divides the requested funding up into the two very different categories so the lender can see the potential for profit a property has. For example, if you are borrowing $25,000 to pay for the property and $15,000 to pay for construction and renovation, the lender can look at the potential value of the home to understand how much room there is for profit. This documentation also allows the lender to see how much work is being done so they can estimate how long the renovations will take.

Your personal or business tax returns from prior years. 

Tax returns are a common document requirement with any loan. However, if you specifically earn an income by fixing and flipping properties, these documents show several things that will be good for the lender to know. For example, tax returns will give the lender a look at: 

• how much profit you have made on prior sales
• how many successful sales you have had versus investment losses 
• how much your general income is 

Your business banking statements. 

If you are borrowing money for a fix-and-flip, it is best if you have a stable income or funding of your own for personal expenses. If you do not have a good personal banking history over the prior few months and no deposits, for example, the lender may be concerned that you have no income to pay for personal expenses while you work to finish the property. This can lead to homes that do not get finished and put on the market in a timely manner.

For more information, contact a fix-and-flip lender.