Best Financing for Flip - Posted by Dennis Redding

import · July 31, 2007, 9:25am

Posted by Rich-CA on July 31, 2007 at 18:47:26:

You can always refi later after you decide to rent. There is no reason to incur the financing costs unless you are sure you want to keep the property.

import · July 31, 2007, 9:25am

Posted by Dennis Redding on July 31, 2007 at 09:25:59:

I have a house that I am buying for $90,000 and it will need approx. $5,000 in improvements in order for it to be ready to sell. After repairs the house would be worth approx. $112,000 - $115,000.

I was going to get a mortgage to purchase the house and then use my credit line to make the improvements and put the necessary down payment. After the repairs were made I was going to refinance and see if I could use the new appraised value to get my money I used from my line of credit back out.

Does anyone have any better suggestions?

Thanks

import · July 31, 2007, 10:23pm

Re: Best Financing for Flip - Posted by joey

Posted by joey on July 31, 2007 at 22:23:55:

why not look for a homeowner that is handy and assign the contract to them and put 3 grand in your pocket and get out.

import · July 31, 2007, 8:56pm

Re: Best Financing for Flip - Posted by adam

Posted by adam on July 31, 2007 at 20:56:47:

i think the margin is too small, i dont like hearing that either. you have to be able to have everything possible go wrong and still make a lot of money. worst case scenario here if your rehab cost double and it takes a while to sell you could easily wind up breaking even. on a seperate note, to answer your question, when i do rehabs, i use an heloc to finance the renovation.

import · July 31, 2007, 7:55pm

Re: Best Financing for Flip - Posted by Nancy in NC

Posted by Nancy in NC on July 31, 2007 at 19:55:48:

Can you rent if for enough to pay the loan, insurance, taxes, and maintenance? If not I would stay away from this property. The profit margin is too small. You could easily get burned. Unless you are flush enough to carry this property at a loss for a year or two.
Just my 2 cents.

import · July 31, 2007, 1:10pm

Re: Best Financing for Flip - Posted by Bill Jacobsen

Posted by Bill Jacobsen on July 31, 2007 at 13:10:40:

I would rerun the numbers on this deal. Make sure this is a deal you wnat. Can you sell at $112K by going FSBO or with a RE agent? If an agent, then put in that cost plus cost of closing on both the buy side and sell side. There is also the cost of getting the first loan. Next, there are holding costs including tax and insurance plus utilities. Figure on at least a 3 month holding time.

I would not refinance if it doesn’t sell. I would lower my price first. If that doesn’t work, I would stay with the current funding. First, they might not refinance you right away, and second, you have the costs of obtaining a new loan.

Bill

import · July 31, 2007, 9:53am

Re: Best Financing for Flip - Posted by StevenS(CPA)

Posted by StevenS(CPA) on July 31, 2007 at 09:53:08:

At first glance the profit seems pretty thin if even if you are flipping retail.

Your holding cost alone may eat up any profit you have in the deal. Plus if you double your repair cost (totally could happen) and if you’re planning on selling it fast for a discount you have nothing left.

I would either move on to another deal or buy this on a lower cost basis.

But that’s just my opinion.

Hope this helps

import · July 31, 2007, 9:27am

Re: Best Financing for Flip - Posted by Dennis Redding

Posted by Dennis Redding on July 31, 2007 at 09:27:47:

The reason I was going to refinance was to have the ability to rent it out if it did not sell quickly.

Forgot to put the reasoning in there.