What Nobody Tells You About Flips
House flipping can be a tempting way to make fast money, but not every fixer-upper has the potential to be profitable. Here are a few things to consider before buying a property in the Twin Cities to flip.
It may take some time to find a house: Many investors are looking for suitable properties to flip. Investment firms employ scouts to find homes to flip in most markets. It may take some time to find yourself a home in such a competitive situation because of its time-consuming business venture. So, patience is required.
Hard Money or Cash is Required: Standard mortgages are structured and priced for long-term financing. You'll need a loan that is designed for a house flip. Hard money lenders and investors are often project-based rather than credit-based, so it may be easier to qualify for hard money as long as your potential flip meets their criteria. Remember though, cash is king.
It’s all About Algebra: The general rule is to avoid spending more than 70 percent of the home's after-repair value (ARV). That number includes the sale price of the home and all repairs. For example, if the ARV is $100,000, you shouldn't put more than $70,000 into the home.
Timing should be Perfect: Your hard money loan can have a 6-month to the 1-year end date, after which you may incur penalty interest.
Keep the Account for Every Cent you Spent: Having detailed information on expenses and loan balances can help keep your funding flowing through each project phase.
In conclusion, you can make some very solid money flipping homes, especially in this market, but it's important to understand the business side of it as well.