When looking at a property you plan to buy-fix-flip, it is important to remember that traditional financing may not always be an option.
While investors are able to obtain up to 80 per cent financing for a traditional buy-and-hold property, these ratios may decrease when you are purchasing a property that is distressed. It is also important to remember that traditional bank financing is not available for renovation costs (especially the unexpected surprises), so you will need to be sure you have the funds to move your project along in a timely manner as every day lost is money out of your pockets.
Questions to ask:
1. How much money do you have to invest?
2. Do you have partners or investors who will work with you?
3. Are you or the property able to qualify for traditional financing?
4. Can you afford to pay for private funding?
5. Do you have an emergency fund?
Answering these questions will give you a clear picture of what you can afford to buy, how much you can afford to spend in improvements, how long you are able to float your project, and how well you will be able to respond to unexpected surprises.
One of the biggest reasons a flip flops is because the investor is no longer able to fund the project within the required timelines. When you take that little bit of time to plan, you will see that you are able to move forward at a much quicker pace and keep more money in your pocket.
LENA GUIRGUIS is a real estate entrepreneur, asset management consultant, coach and author. She is a managing partner at New Venture Solutions, and a co-founder of NV Property Management, a boutique-style property management firm. Guirguis also founded Stilettos & Hammers, an all-women's investment network focused on educating women on how to plan for retirement, manage their cash flow and assist them in the purchase of their own investment properties. Contact her at 800-454-1095 ext. 206 or firstname.lastname@example.org
This article was originally published in the August 2014 issue of CREW
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