Let us Help You with your flipping needs.
Flipping houses has been on the rise across the nation. Just over 6% of all home sales were house flips in 2016. That’s the highest percentage in a decade!
All you have to do is watch an episode of any popular house-flipping show to get why it’s so appealing. A thirty-minute segment makes it look pretty easy to flip a house and make a huge profit. Seems simple enough, right?
If you buy a house to sell for a profit. For the house to be considered a flip, it must be bought with the intention of quickly reselling. The time between the purchase and the sale often ranges from a couple months up to a year.
-
You invest in a property that has potential to increase in value with the right repairs and updates. After completing the work, you will make money from selling the home for a much higher price then what purchased the home for. Our goal is to help you meet that potential.
We’re mainly focusing on the first definition of house flipping, providing you with tips to help you choose a property, make renovations, and sell the smart way. We no the cost of the renovations and materials when we walk upon the property.
Steps To Flipping
Step 1: Finance the House Flip With Cash
House flipping can be a risky endeavor, and it’s easy to see why adding debt into the mix only makes it more dangerous. Here’s why we always recommend you flip a house with cash:
-
First, flippers who take on debt for their purchase pay interest for months, which only increases the amount they have to sell the house for just to break even.
-
-
Second, using debt to finance a flip can cause you to act out of desperation. If you can’t get the house sold, for example, you’re likely to lower your price and cut your profit. Cash-only flippers can wait out a slow market.
-
Let’s imagine at a real-life scenario: You purchase a house to flip for $130,000. You finance an additional $30,000 for renovations and hope to sell the house for $200,000 to keep a nice profit.
Sounds like a great plan, right?
All seems to be going great until an unexpected repair costs an extra $2,000.
And then renovations take six months instead of four, costing you an extra $3,000. When you list the home, it sits on the market for a month before you’re forced to drop the price and sell it for $185,000. A month later you close and get your payout.
Here’s how that breaks down:
Selling Price: $185,000
-
Purchase Loan: $130,000
-
Renovation Loan: $33,000
-
Estimated Interest Paid Over Eight Months: $4,240
-
Repairs: $2,000
-
Closing Costs: $15,000
Your Profit: $760
Do you really want to make $760 from eight months of work? That’s a house flip gone wrong!
If you had flipped the house with cash, desperation wouldn’t have forced you to sell low. With the power to wait out the slow market and save all that money on interest, you could have pocketed a $20,000 profit on the same deal!