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How to Flip Your Fix-and-Flip

Eager to take on your first fix-and-flip investment property? Before you dive in, there are some important tips to keep in mind that can help you make the most of your investment while appealing to the greatest range of potential buyers.

Start With Comps

Always take some time to get to know the neighborhood before you invest in a fix-and-flip property. In general, you’ll want to focus on improvements that will be most appealing to local buyers—and you can learn a lot about what local buyers want by looking at nearby homes. This research can help you get a better idea of where you should spend your money to see the biggest returns.

Don’t Overlook Curb Appeal

No matter where you’re looking to sell a fix-and-flip property, curb appeal will be vital. Many of today’s buyers won’t even set foot inside a home if it doesn’t look inviting and charming from the outside. This means you’ll want to prioritize projects that will enhance curb appeal, such as repainting exterior siding, installing new landscaping, and possibly even replacing an old mailbox. These small improvements can make a big difference in getting potential buyers in the door.

Focus on Staging

While it will cost some money up-front to have the home professionally staged, any experienced fix-and-flip investor will tell you that this is a service worth paying for. Having a home staged is a great way to help potential buyers envision themselves living in the home. Specifically, the right staging can highlight the home’s strengths while also defining living spaces that may otherwise be overlooked.

Create a Beautiful Listing

The majority of today’s buyers are finding properties online, so it’s more important than ever that your listing stands out from the rest. This means that you need to have plenty of high-quality photos of the home inside and out. It may even be worth it to hire a real estate photographer and/or videographer to make sure that the home is captured in the best light possible. You might even consider offering a video walk-through or virtual showings of your property.

From there, crafting a compelling listing that highlights all the upgrades and amenities that the home has to offer is a must. If you’re not experienced in writing your own real estate listings, this is where it may be worth hiring a professional to handle this for you.

The Bottom Line on Fix-and-Flips

Flipping a house requires a lot of hard work and patience—but when you follow these tips, you can make the most off your investment. At the same time, you’ll be providing somebody with the house of their dreams. Looking for help financing your fix-and-flip project? IMC Money has you covered. Contact us today to apply!

Finding the Perfect Fix & Flip Houses

Fixing and flipping houses is both emotionally satisfying and lucrative labor. But if you choose the wrong house, it could be disastrous. There’s an art to finding the perfect houses to fix and flip. Let’s take a look.

Know Your Limits

As a flipper, you’re going to be doing the majority of the work. Don’t take on more than you think you can do; if there’s something you know nothing about (such as an old well on a property, a broken septic tank, major foundation issues, etc), you shouldn’t be buying. There are many things that can be easy to fix or extraordinarily expensive (such as electrical systems that may not be to code), and if you’re not well-versed in it, you may not be able to tell the difference.

Avoid Major Structural Issues

When it comes to foundation problems, framing issues, and other structural issues, it’s often less expensive to just knock down the house. When houses have major structural issues, they’re usually only repaired out of practicality or sentimentality. As a flipper, you don’t want to get into these major, expensive changes; you want to be able to concentrate on improving a house that’s already “almost there” rather than rebuilding one from scratch.

Keep the Neighborhood in Mind

It’s better to buy a cheap house in a great neighborhood than a great house in a bad neighborhood. While the property might be fantastic, a neighborhood is always going to pull a house in its direction. Focus on up-and-coming areas if you really want houses that are going to deliver in value. The only exception is for houses that are truly fantastical and eye-catching — and those usually aren’t going to need the services of a flipper.

Get Creative About Your Sourcing

If you’re in a hot market, it’s likely there are other flippers out there. So, you might want to get creative about the houses you source. Network with other agents, look at things like estate sales or garage sales, drive through neighborhoods, and otherwise find properties that might not yet be on the MLIS.

Your project begins with finding the right house. It’s important to take your time. It’s also important to find the right capital. Check out IMC Funding for the latest in financial news and resources, and feel free to contact us for more information!

Fix & Flips vs. Buy & Holds

You’re buying a property. You can either “fix and flip” or “buy and hold.” Both of them have pros and cons; one is a very active form of investment and the other is mostly passive. Which is the best option for you? Let’s take a look at the pros of both and why you might want to invest in them.

The Pros of Fix and Flips

When you fix and flip, you try to fix a property and sell it as quickly as possible. Some major benefits of a fix and flip are:

  • You may be able to make a lot of money. You can buy a property for $100,000, put in $20,000, and sell it for $180,000. That’s a lot more money than you’d get for renting the property over the same amount of time.
  • You can use the capital almost immediately for something else. That means you can buy another property to fix and flip. You can even buy another property to buy and hold. It’s whatever you want to do.
  • You don’t have any long-term responsibilities. Once the project is over, it’s over; you aren’t going to need to worry about it. You can take a break and relax between your projects. You can also wait until the market is more favorable, during downturns.

So, once your project is over, it’s over. You’ve done it. You walk away with the cash to do whatever you want with it. But, of course, that also means that you’re starting again from square one, without a property to call your own.

The Pros of Buy and Holds

Many fortunes have been made of buy and holds. The theory is simple: property is always going to appreciate in value. It’s finite. Thus, you can build equity through property while still making money through rentals. Benefits of buy and hold include:

  • You build equity to leverage. Not only are you building net worth, but banks and creditors will be more likely to lend you money because you have so much equity. Over time, if managed correctly, you can create a significant portfolio of work.
  • You have a consistent income. While you aren’t getting a large lump sum every few months, you are regularly getting income (as long as your properties are rented out). This can be more predictable, especially for those who are interested in retiring.
  • You don’t need to worry about managing big projects. Your property management company can help you get renters, along with managing repairs and maintenance. This is a far more passive rather than active method of investing, especially if you have help.

But there are downsides, too. Buying and holding is a responsibility. You need to manage your rentals. And occasionally they can cost you more than they’re bringing in. Fixing and flipping might make you a lot more money, but it also won’t build equity; it’s a trade-off. If the rental market in your area is poor, you also may not have significant profit margins.

Which Do You Want?

Obviously, if you’re trying to build equity, you want a “buy and hold.” Buy and holds provide you with more predictable income — if you’re nearing retirement, you’ll want to hold onto your properties rather than sell them. But if you’re trying to make money fast, fix and flips just make more sense. Fix and flips offer less risk exposure, higher gains, and a quicker turnaround.

But either way, you’re going to need a lender. Contact IMC Money today to find out more.

How Do You Determine An Offer Price on a Fix-and-Flip?

One of the most important aspects of making sure your fix-and-flip venture is profitable is knowing how much you should pay for a property. When you add on the cost of any repairs and renovations you make to a home to the price you paid, you need to be able to sell the home for more than that amount in order to consider the project profitable. If you end up paying too much for the property, you will struggle to break even when it comes time to sell. The following tips will help you determine how much you should offer when you’re buying your next flip property.

Calculate the ARV

The ARV, or after repair value, refers to how much you can expect to sell the home for when you’re done renovating. Starting any project without knowing the ARV already puts you at a disadvantage. The best way to accomplish this goal is to work with a realtor you can trust. Their knowledge of the current market, as well as how much similar homes in that area are selling for, is invaluable in determining what you can expect buyers to pay. Focus on homes that recently sold, rather than those that are currently listed to ensure you know how much buyers are actually paying versus what other sellers are expecting. Only use data that is three to six months old because of how rapidly the market can change.

Determine Your Costs

Renovations will always cost money, whether you handle them on your own or hire contractors to complete them for you. The cost of these repairs and renovations is critical to determining how much you should pay to ensure you can make a profit in the end. Some changes, such as new carpeting or painting a few rooms, can be done rather affordably, but if the home needs more extensive work, be sure you get several quotes from contractors, so you know exactly how much to budget. Keep in mind homes that require more extensive repairs are a riskier investment than those that simply need cosmetic changes or upgrades because of the risk of hidden problems you may uncover through the process. Always plan for a few extra expenses to give yourself a cushion.

Don’t Forget Other Expenses

When calculating your costs for your fix and flip, don’t forget about the usual real estate costs that come with this type of investment. You will need to cover closing costs when you purchase the home and may even pay the buyer’s closing costs when you sell, if that’s part of the deal you make. Unless you have the funds to invest yourself, you’ll also need to get a loan to buy the property, which means making payments with interest until you’re able to fix and resell the home. Finally, if you work with a realtor, there will be commissions to pay on the selling price of the home. When calculating how much you should offer for a property, don’t forget to factor in these costs as well.

Should Your Project Be a Rental or a Fix and Flip?

When you’re looking at a potential investment property, one of the most important questions you’ll need to answer is whether the property is better suited as a rental or a fix-and-flip project. This is one decision that even some of the most experienced investors struggle with.

If you’re considering a real estate investment and aren’t sure which route will be best, there are some considerations you should keep in mind to help you make the right choice.

The Property’s Current Condition

The current and overall condition of the property, as well as its age, should play a major role in your decision to either buy the property as a rental or flip it. Generally, older properties will require more long-term maintenance and upkeep, which tends to make these homes better candidates for fix-and-flip investments.

Meanwhile, a newer property that needs some up-front work but is otherwise in decent condition may be more suitable as a rental. The exception to this may be a property that is located far away, which can create additional headaches for you as a property manager/landlord. If you’re investing in a property from afar, your best bet is typically to treat it as a fix-and-flip (unless you’re comfortable shelling out monthly fees for a property management company’s services).

Local Real Estate Trends

You’ll also want to consider local real estate market trends when deciding whether to buy a property as a rental or a fix-and-flip. While there are currently more renters in the residential real estate market than ever before, this won’t necessarily be the case in the exact area where you’re looking to invest. Taking some time to truly get to know your local real estate market and whether people are looking to rent or buy can make your decision a much easier one.

Your Budget and Preferences

If you’re looking for a property that can start generating income for you sooner rather than later, then a rental may make more sense. On the other hand, flipping a property rather than renting it out can prevent your money from being tied up in any single real estate investment for too long.

Of course, part of your decision to rent or flip will ultimately come down to personal preference. Some investors simply don’t like the hassle of playing “landlord” and would thus refer to flip and property, sell it, and be done with it. Likewise, other investors may enjoy the long-term income string that a rental property can provide.

Need a Hard Money Loan?

Regardless of whether you end up flipping or renting out an investment property, you’ll need to secure the right funding to get started. If you’re searching for a hard money loan for a real estate investment property, IMC Money is here for you. We offer a wide range of hard money loans and other financing options to suit your needs. Contact us today to find out more about our services!

How Do You Find Fix & Flip Opportunities?

If you’re interested in getting involved in fix and flip opportunities, the first step in the process is learning how to find properties. The key is to find properties offered at a low price that don’t require more work than you can handle. The good news is there are several ways you can find the ideal property to fix and flip for a profit when you know where to look.

Foreclosure Sales

While you will need cash to make this type of purchase, foreclosure sales are an excellent way to find properties, usually in relatively good condition. Anyone can fall on hard times and fall victim to foreclosures. Be sure to check the foreclosure listings in your local paper often so you can check out properties before the sale hits and you know which ones you want to try to buy. These sales typically require 10 percent of the purchase price as a down payment with the remainder due within 30 days, giving you enough time to secure a loan for the rest.

For Sale by Owner

Many homeowners attempt to save money by selling their homes without the assistance of a realtor. You can often get these homes for less than going through a realtor because homeowners are typically more flexible when they don’t have to deal with realtor fees. They also often want to sell quickly, making them more likely to accept your offer.

Take a Direct Approach

Another option is to drive around areas you’re interested in working in and look for homes that show signs of neglected upkeep. These homeowners may have either moved away or may not have the ability or money to take care of the home properly. Approaching these homeowners directly could result in someone selling to you when they were simply holding on to the property to avoid the hassle of selling it. Homeowner information is often available in property tax records.

Probate Court

When a family member passes away, families often struggle to figure out what to do with a home their loved one left behind. They are also more likely to accept a lower offer simply because they have no need for the home and want to get rid of it quickly so they can split the money between the next of kin. Check local newspapers and other resources to identify properties that have entered probate. This process can take anywhere from a few months to over a year so be mindful of that. Reaching out to the executor of the estate can expedite the process.

Tax Auctions

Foreclosure isn’t the only reason people lose their homes. Those who fall behind on their property taxes may find their home is sold at a tax auction instead. However, you must register as a bidder prior to these auctions to take part. There are two types of tax auctions. You want to look for tax deed auctions where you buy the property outright versus tax lien auctions that simply make you the homeowners landlord with the potential for foreclosure if payments aren’t made.

Rental Properties

A final option is to look for rental properties, especially those that seem to advertise for a long period of time between tenants. Sometimes landlords grow tired of dealing with tenants and would rather sell the home than continue renting it. However, don’t be discouraged if you’re turned down for your offer to buy.

Tips For Flipping A House For The First Time

Flipping a house for the first time can seem a little intimidating. However, if you follow these tips, it should be smooth sailing.

Know and Analyze the Local Estate Market

It’s important to know the neighborhoods you want to invest in like the back of your hand. You need to familiarize yourself with the sales prices for different types of homes, schools, neighborhoods and demographics. Real estate sites like Trulia and Zillow can give you some data on current home selling prices. And you get the rest of the information from other local realtors. Once you get this information together, go ahead and analyze it. By analyzing the data, you’ll know how much local buyers are willing to pay and you’ll know the types of properties that buyers are interested in buying. Knowing this information will allow you to avoid winding up with a home that sits on the market for a while versus one that flips quickly.

Get a Team

Building yourself with a skilled team is critical for a successful flip. You’ll need a team of general contractors, realtors, lenders, accountants and real estate attorneys. You get a team together through referrals and networking. Start to go to meetings of local real estate investment organizations, join some business networking groups and become a member of the chamber of commerce. Realtors can give you access to properties that are currently on the Multiple Listing Service. You should speak to as many realtors as you can. This includes both selling and buying agents. Having a team is essential for a profitable flip.

Find a Flippable Property

Once you’ve identified what types of homes sell best, focus on those ones. For example, if four-bedroom houses are selling well, rehabbing one of these is likely your best bet. In addition, you need to know who your likely buyers are. It may be empty nesters, seniors or singles. Know what their needs are. A family with young kids may need a four-bedroom home with two bathrooms.

Keep an open mind, too. Your leads may wind up coming from a variety of sources, such as friends, banks, realtors, family members or trustee sales. Another good source for flappable properties is foreclosures. Just keep in mind that you’ll probably need a cashier’s check or cash to pick up a foreclosure. You also may not be able to view the foreclose. So, you may have to deal with squatters or hidden liens on the title.

Structuring the Deal

Once you’ve established the value of the property, you then need to calculate the after repair value. This will tell you if it’s a good deal for you. When you inspect the property, work with a good general contractor and review the budget repair sheet. You need to know all the repair costs in order to determine the after repair value. Follow the 70 percent rule. Only take on projects when the after repair value is less than 70 percent of the final selling price. Once you make the sale, use an experienced real estate lawyer to write up the contract.

Manage the Rehab Process

Keep yourself in the loop and work closely with a general contractor. This will keep you on track with the renovations and within budget. Obtain estimates from contractors and keep track of their progress on your project. Make a written timeline and make sure everything goes according to plan in a timely manner. This will help avoid carrying costs.

What You Need to Know About Fix & Flip Hard Money Loans

Real estate investing is a fast-growing trend that allows individuals to make a lucrative investment in their future. While many people think about buying property to rent out to generate a passive income, there are other options. If you love doing fix-it jobs around the house, buying property that needs work to fix it up and resell it for a higher price can be a more attractive real estate investment option. However, it can be a challenge to get the funding you need for this type of project, which is where hard money lending comes into play. The following will tell you everything you need to know about fix and flip hard money loans so you can get started.

The Basics

Hard money lenders often loan out their money at higher interest rates with larger down payments required in exchange for some other benefits that can make traditional lending more difficult. For instance, your credit will have much less bearing on these arrangements than seeking a traditional mortgage loan through a bank. In addition, the lender typically looks more at the overall value of the project, rather than whether your credit is good enough for a loan. In these situations, the property you buy is used as collateral. These loans are designed to last for a shorter period, just long enough for you to make the needed renovations and sell the home, which means the higher interest rate doesn’t have as big of an impact on how much you spend.

Hard Money Loan Requirements

The requirements for fix and flip hard money loans are quite different from your traditional mortgage loans. Rates for these loans typically run between seven and 12 percent, which is often higher than traditional mortgages. Your lender will look at the loan-to-value ratio to determine how much to offer, as well as the terms of the loan. Fee or point between one and 10 percent may also be charged.

How to Qualify

Once you make the decision to use fix and flip hard money loans, you next need to learn how to qualify so you can increase your chances of finding a lender who will work with you. In many cases, hard money lenders operate with a simple online form, especially since they don’t usually factor your credit into the equation. All you need to do is complete the loan application and pay the application fee. You may also need to provide two to three months of bank statements, a signed offer for the property you intend to purchase, the address of the property, any contractor agreements you have and your plans for renovation. This will help the investor decide if they want to fund your project.

Why Use These Loans

Most individuals who purchase and flip properties can benefit from using hard money loans versus a more traditional mortgage. Not only are they easier to qualify for and include shorter terms, but they also offer faster approval times so you won’t lose out on buying a great value you can turn around for significant profit. Including a business plan with a clearly defined project end date can help increase your chances you will be approved for this type of loan.