Are you looking to take out a fix and flip loan? If so, check out this guide to learn the top tips for fix and flip loan borrowers.
In the recent past, the house flipping trend has become a craze. Statistics have shown that on average, flipped homes in the US earn a gross profit of $29,342.
This profit is almost the same even if you flip houses worth $100,000 or $200,000. Most people have found it a great way to make money, especially because it has almost a 50% return on investment.
Keep in mind, though, that the amount of profit you make will depend on the State you are in.
If you are looking for a finance loan for your next purchase, fix and flip loans are what you need. These loans are born out of necessity to give real estate agents the access to capital needed in a couple of days.
Speed is the name of the game, since the faster they access the loan, the quicker the fix and flip and the higher the reward. check out this guide to learn the top tips for fix and flip loan borrowers.
1. Never Buy a Mechanically Damaged House to Fix and Flip
When choosing the right home for a flip, it is advised that you focus on houses that mostly require just cosmetic improvements. If the home needs a new roof or its electrical system is outdated, it will take up too much of your money and may not return a healthy profit. Also, avoid homes that have foundation problems unless you can fix them yourself.
It is always advisable that you focus on lower cost improvements that have a huge impact. These include a coat of paint, refinished hardwood, new carpeting, and kitchen appliances.
2. Don’t Overpay on Property
One of the biggest issues that surround real estate is that some agents are after making big bucks. They may, therefore, sell the house to you at a higher price than its actual value.
When remodeling and selling, you always want to be making some decent profits. So go to the right agent, do thorough research and make sure you inspect the home properly.
It always helps to have someone in your team who will offer a second set of eyes when purchasing flips. This person should be an experienced realtor who will thoroughly analyze and come up with the appropriate purchase and resale price.
3. Sharpen Your Marketing Skills
The last thing you want is to buy a house that will take too long to sell. So you need to make sure that you sharpen your marketing skills. You also need to have a list of the renovations you have done, the features and amenities and the workmanship. With these, it will be easier to tell your buyer why the property is good for them.
4. Carefully Map out Your Profit Margin
Before making a purchase, take time to precisely and carefully calculate your profit margin on any flip. You should weigh this against your costs, this includes your holding costs.
You should also consider the costs of stress, anxiety and the level of strain you will encounter in the flip. Include all that in your profit margin and see whether the price range is a reasonable one for the buyer.
5. Have an Exit Plan
The goal of fix and flip is to sell the house fast enough to make a hefty profit. However, in some cases, there are things out of your control that may change the outcome of things.
For instance, if the real estate market shifts, or there is an economic crisis or there are changes in the financial rules, then you may not make a profit at all. There are also times where you spend more than you originally thought you would, you may have overestimated the price of the property after renovations or taken too long to complete the projects.
You should plan for an exit. For instance, you may have to hold and rent rather than take the loss. For this, make sure that the property can increase your cash flow and still make you some money.
If the worst happens and you have to keep the house, ask yourself, will it still make you some money? If yes, then it is a good buy. If no, look for other options.
6. Don’t Look for Deals, Create Them
There is a huge difference between high-level investors and those who are just getting by. Most investors will say there are looking for deals. However, your goal is to create a system that brings these deals to you.
High-level investors will never be found saying that they cannot find deals. They are never really looking for deals. Instead, their businesses are set up so there is constant lead flow.
These systems are made of people who sift through the leads and follow up to see if there is any hope there. They run these businesses through KPIs and dashboards. Their main aim is to empower their teams and systems to make their businesses better.
You need to surround yourself with people you can learn from. Find podcasts, forums, and books that will also help you in your initial steps. If you surround yourself with struggling investors, it will really slow you down.
7. Find a Reputable Hard Money Lender
Once you see a piece of property you want to flip, ensure that you make secure finances that will help you make necessary renovations. Keep the profit margin in mind and consider the interests before taking the loan.
Take time to research and find a reputable lender with competitive rates. You also need to ensure they can give you the hard money loan in 14 days or less.
Take a Fix and Flip Loan
There are a lot of risks involved in conducting a fix and flip. If you are not certain of what you are doing, you risk losing your investments. So be careful when looking for houses and financial support to ensure you reap the bountiful rewards from each project.
Check out our web-page for more information on where to find the best money lenders.