New Jersey’s top cities have hosted several developmental projects since the 2010s. As old structures make way for modern condos, high-rise apartment buildings, and McMansions, the locals have a growing sentiment to preserve New Jersey’s historical brownstones, log homes, and mansions.

Real estate investors can tap into this growing demand by purchasing and rehabbing one of these crumbling homes for a decent and quick return on investment. Click here to apply for a short-term fix and flip loan in New Jersey.

This guest blog will reveal the features that make flipping homes in the Garden State for a passive income profitable and how smart financing facilitates such ventures.

An Overview of Fix and Flip Investments

Real estate investors who haven’t been in the game for long may not know much about fix and flip projects. Either that or they might have heard polarizing reviews about this investment opportunity.

The flipping side of real estate investment can have high stakes. Thus, many investors refrain from diversifying their portfolios with this strategy.

Conversely, investors who choose this route invest almost exclusively in distressed properties. They renovate these structures from the inside out, resell them, pay back their hard money loan, and consider the remaining amount their profit.

They then take out another fix and flip loan to purchase another distressed property, and that’s how they make bank.

While only some states are amenable to this real estate investment strategy, New Jersey is teeming with crumbling structures awaiting renovation or demolition, whichever comes first.

Below are some reasons why these structures must be your next fix and flip project.

The Profit Potential

Before homeowners and investors list a property, they often invest in several repairs and renovations because they know that anything they spend on these changes will pay manifold.

When executed successfully, fix and flip projects come with substantial profits. The final selling price of each property usually exceeds the initial purchase price and the total renovation costs and still leaves the buyer with enough money to be considered a substantial profit.

The Cost Approach

Appraisers usually take three routes to evaluate the market value of a property.

Sales Comparison Approach: The most common approach in property appraisal is when appraisers identify how many similar properties have sold in the market in recent days or months.Income Approach: Recommended for leased buildings, an income approach considers a property’s potential rental income to evaluate its market value. Cost Approach: The cost approach estimates how much it would cost to rebuild the same or similar property. Appraisers take this approach when there is little to compare a structure on the market.

New Jersey’s historical brownstones and other old structures are incomparable. Thus, they can be appraised using the cost approach. The upside of this approach: The seller can be as subjective as they want because there’s no quantifier for historical value.

A Healthy Assortment of Properties

New Jersey’s real estate market showcases a healthy assortment of lakefront, beachfront, and waterfront properties for commercial and residential use. The variety allows investors to diversify their investment strategies, shifting from new constructions to fix and flip projects to rental income, according to the changing market conditions.

With the right lending partner, you can have a complete real estate investment portfolio in New Jersey alone.

The Role of Smart Financing in Fix and Flip Ventures

While the potential for profits is attractive, the road to successful property rehabs can be challenging without the right financing strategy. This is where fix and flip loans come into play.

These hard money loans are tailored to the unique needs of investors seeking short-term financing for the purchase and renovation phases of their projects.

Below are the advantages of this smart financing option for tangible asset investors in New Jersey.

· Flexible Terms

Conventional financial institutions, such as banks, have a string of eligibility criteria and conditions for rehabilitation loans. They may also refuse to grant a loan on properties they deem uninhabitable—this is where hard money loans come into play.

Fix and flip loans are less strict and restricted than their conventional rivals. They are less bureaucratic and involve minimal paperwork. Moreover, your odds of getting approved as a beginner investor are much higher with a hard money lender.

· Quick Approval

Fix and flip loans offer faster approval processes than traditional bank loans, which is essential for capitalizing on time-sensitive market opportunities.

Getting a similar loan at a bank entails a lengthy procedure where the outcome is uncertain. On the other hand, approval is almost guaranteed at a smart financing institution. If you apply early enough, you may hear from the lender on the same day. Thus, you should know about a rejection/approval in about two to three days.

· High Loan-to-Value Ratio

The loan-to-value or LTV ratio is the amount an investor or homebuyer borrows to the market rate of the property. It is expressed as a percentage. For instance, if an investor borrows $450,000 for a property appraised at $1,000,000, they have an LTV ratio of 45%. The higher the LTV ratio, the riskier the loan granted to the borrower.

Fix and flip loans often offer a higher loan-to-value ratio, enabling investors to secure funds for property acquisition and renovation costs. 

InstaLend’s Take on LTV Ratios

InstaLend grants investment property loans to investors usually turned away by conventional financial institutions. Instead of LTV ratios, the company swears by an LTARV ratio, the Loan-to-After-Repair-Value of a property set for extensive renovations.

The special thing about InstaLend’s fix-and-flip loans is that it grants up to 90% of a distressed property’s purchase value and 100% of its rehab costs to new and seasoned investors. Their loans are your best bet if you don’t have the capital for a fix and flip project.

Apply for a loan with zero upfront fees, prepayment penalties, or proof of income.

About the Author

James Ashton is a real estate investor based in Hoboken, New Jersey. He specializes in new construction and fix and flip projects. While these ventures take up the lion’s share of his time, the rest is spent exploring obscure museums, supporting independent bookstores, and trying the state’s diverse cultures and cuisines. This is his first blog recommending his primary lender, InstaLend.