What is “Fixing and Flipping” Properties
Fixing and flipping a property is the process of buying a home for pennies on the dollar, fixing it up and reselling immediately for a quick profit. Many investors flip properties in Nevada to get their hands on fast cash. If you cannot sell your home right away, it is not considered a “flip.” The goal is always to sell the home fast for much more than the sales price. The best way to properly flip a home is to buy a home in a market where home values are on the rise.
Financing or Paying Cash
Flipping a home is not as easy as it is portrayed on the array of T.V. real estate investing shows. Investing in any type of real estate for profit is risky business. If you finance a flip and cannot sell it immediately, you will wind up paying thousands of dollars in interest until you sell the home. If you hold the property for too long, it could wipe out any profit you expected to collect from the flip.
Most experts agree it is smarter to pay cash to fix and flip a property in Nevada. First off, cash eliminates the hassle of trying to find a lender to finance your deal. Secondly, you pay no interest when you pay cash for your flip. Third, you own the house outright and are free to complete as little or as many repairs as you see fit. When you finance a fix and flip property, lenders can limit what you can repair or replace on your investment.
Ideal Fix and Flip Properties
If you pay full market value for your first flip, you are off to a terrible start. The goal is to buy distressed properties for far less than their market value. Typically, distressed properties are in some form of default or foreclosure. When banks take possession of these properties, they often sell them at a reduced price to get them off their books. It costs banks a lot of money to maintain possession of a foreclosed property.
Most distressed homes need renovations or repairs. If a home requires extensive renovations, it might not be worth buying and flipping. Some distressed homes need so many repairs that any deal would not make sense even if the house was listed for free. However, many distressed homes only need minor repairs that cost a few thousand dollars. If you can find a home in Nevada where prices are on the rise, it might pay to spend that money on those repairs and make the home comparable to other homes in the neighborhood.
Loans for Fix and Flip Properties
Loans for flipping properties are not as hard to find as you might think. There are several options, and each one has its own unique benefits and drawbacks. Here is a short list of loan options:
• Hard Money Loans- These loans are available through private investors or companies that specialize in hard money financing. Qualifying for these loans is easier than traditional mortgages. Hard money lenders approve financing based on the value of the investment and not your ability to repay the loan.
• Personal Loans- You can use an unsecured personal loan to finance fix and flip properties. There is no restriction on what you can do with the funds. However, unsecured personal loans require a high credit score and other strict requirements.
• Home Equity Loans- You can use the equity in your primary home to fix and flip a property. Equity is the market value of your home versus how much you owe. If you have 20 percent equity in your home, you can take out a loan against that equity and use the funds to buy an investment property.