Fixing and flipping homes may seem easy enough on the surface, but there are many things to consider before diving in. As with investments of any kind, it’s always wise to perform your due diligence before investing a dime. People can, and do, make money flipping houses, but keep in mind you can also lose money if you’re not careful.
Here are some things to be aware of in order to make your fix and flip a success.
Fix and Flip Costs
The goal of a fix and flip is to sell the home for more than you put into it, obviously. However, there are more costs to consider besides just the purchase price and costs of repairs. When determining what price you would need to get for your flipped house, make sure you factor in all costs. These additional costs include interest and other costs associated with your loan, insurance costs, property taxes, any homeowner association fees, maintenance costs (such as regular yard upkeep and snow removal), and any costs associated with the actual sale of the home.
Duration of a Fix and Flip Project
Another thing you want consider before beginning any fix and flip is how long it will take you to complete the project. Can you afford to have the cash of your initial investment tied up until the home sells? If you’re thinking about jumping into a high-end fix and flip, keep in mind that not only will the repairs most likely take longer and cost more to keep in line with the style, but it may also take considerably longer to sell given the market size for those looking for a higher-end home. Not only will a smaller home be quicker to renovate, it may take lot less time to sell. In addition to the time it takes to do the actual repairs, be sure you are aware of how long it might take to line up a contractor, which could be several weeks or longer.
Fix and Flip Repairs
One of the hardest parts of a fix and flip project is the actual repair work. Unless you are a professional contractor and are able to work on the renovations full-time, it’s rarely a good idea to carry out the repairs on your own. The longer your project takes, the more it will cost (interest, fees, maintenance, etc.). An experienced contractor will be able to finish the repairs much quicker than you and/or your buddies could by just working on the home on weekends or in your spare time.
Financing Your Fix and Flip
Very few people have the cash laying around to completely finance a fix and flip investment, so most likely you’ll need some sort of financing. Traditional real estate loans often come with numerous restrictions and therefore aren’t always an option for those looking to fix and flip a property quickly. Hard money loans are usually a much more viable solution for the real estate investor because they resolve many of the key pain points of traditional mortgages. Also known as private lenders, these financial tools are more readily used today than previously because they are well-suited for the fix-and-flip investor.
Catalyst Funding specializes in hard money rehab loans in the Houston, TX area, helping investors acquire and rehab properties for investment purposes in this hot market. Whether you are looking to do a complete remodel, or simply clean up a property and put it on the market, we can help you secure the financing you need for your fix and flip project.