Our lender, who specializes in loaning on flips, lends on a Max LTV is 80% of the after-repaired value, and minimum down payment is $10,000! They value the property as if completed with the renovations planned. They only require the purchase agreement, budget (using your own capital for the reno) and description of renovations. Proof of funds for the down payment, reno and carrying cost is required. Make monthly interest only payments 1.29% interest per month.
What Makes a Flip Successful?
Buy Right! This is a key factor of a successful Flip. You make money on the buy, not the sale. Ways in which our successful flippers have made money on the buy: purchasing discounted properties, properties in poor shape, cash offers. Discounted properties often need a quick close. Finding the right property can take time. Be resilient.
Renovate for the Market: This means understanding what the community ceiling is, what the community renovation standard is (don’t go above it). This requires you to do research on the particular community to ensure you are renovating for the market and community, don’t be an outlier.
Stick to a Budget: It is important to create a realistic budget and stick to it. Successful flip clients typically focus on ‘lipstick and makeup flips’, this means avoiding large mechanical renovations and focusing on quick easy renovation that will change the look and appearance of a property.
Quick Renovation: A key aspect to successful flips is completing the flip in a short time frame. Shoot for 3 month (2 month reno, 1 month sale) projects and budget for 5 months. When completing a flip project you want to do it quickly to avoid carrying costs.
Understand Reno Costs: Be realistic when completing your budget for a project, more risk of cost overruns on larger projects.
Know your Numbers: Ensure you understand all costs associated with a flip.
Neighbourhood – understanding what to look for when determining a particular neighborhood to flip in.
- Do your research
- What is the community ceiling for sales
- Don’t go above the community reno standard
- Buy and renovate to the neighborhood
- Inventory! Be aware of the inventory in the area
- Because speed is so important for a flip, a neighborhood with low inventory is also important
- Recent sales should be your best indicator for value, however you should also be aware of active listings to know what you might be competing against
- Also, look at expired listings – why did they fail?
Valuation Techniques – how to properly valuate properties on an as if renovated basis. Make sure you stick to the numbers.
- You make money on the buy!
- Don’t manipulate the numbers to lie. Stick to the numbers
- Don’t base your value on actives or sales from a long time ago (6 months or older). The market is consistently changing and your value should be based on the most recent comparable sales (last 3 months sales would be ideal)
- Price to sell, don’t shoot for the stars. Again stick to your numbers.
- Try to compare recent sales in the same neighborhood that were also renovated.
- Some of the most important aspects of a property to consider when comparing yours to another are:
- Date of Sale, Lot Size, Design/Style (bungalow, bi-level, 2 storey, etc.), Age/Condition, Building Size (sqft), Room Count (above grade beds and # of baths), Basement (undeveloped, developed, suited, etc.), Parking (double detached, no garage, carport, etc.), Upgrades and Yard Development
- These are some of the main things that we consider when completing our in house valuations
Make money on the buy – finding a good deal is the most important aspect of a flip.
- How you make money on the buy
- Cash offer – Our lender can approve real estate investors on a personal basis. Complete in house valuations and confirm if the flip is likely to be profitable. Allowing clients to put in a cash offer.
- Quick Close – Our lender can complete in house valuations for properties on an after repaired basis within 24H or faster if need be. Allowing you to close on a property faster
- Solve someones pain – foreclosure, divorce, financial trouble
- Find the right realtor who understands what you are looking for
- Always be searching for good deals, whether that be on the MLS, For Sale by Owner Sites or Door Knocking
Sourcing Deals – How to find a good deal
- Make a plan!
- Be Ready
- Discounts require you to act fast and close quickly
- Have a team in place – Realtor, GC, Financing
- Find a realtor who understands flips and your plan. We understand Mark has been working with more real estate investors and could be a great option.
- The realtor must understand, what sort of flip you are looking for (big or small), your abilities to renovate and the neighborhood you are seeking
- Check titles – Builders lien, writs, CLP, Tax Liens, Condo fees
- Look for – Foreclosure or pre-foreclosure, expired listings, poor exterior shape
- Consider timeline
- How long to renovate and how long to sell
- Shoot for 3 months (2 month reno and 1 month sale) and budget for 5.
- Small vs big reno — More risk of cost overruns on big renos. Do you get a bigger margin on bigger renos. Big renos can take more time and can cost more in overhead.
- Look for large discounts, again you make your money on the buy
Understand Renovation Costs – some tips to ensure you get the most out of your renos
- Refining hardwood – change color
- Colors can be important and certain material as well. Go with what is on trend
- Resurface tubs
- New kitchen – new cabinet doors or spray cabinets
- Tiles sell – average person cant tell the difference in price of tiles
- Brand of appliances doesn’t typically matter. Style and new can be of good value
- Don’t get into mechanical upgrades unless absolutely necessary
- Inspections are important – make sure the property is structurally sound
- Consider replacing a poor roof
- Don’t renovate above the community standard
- You’ll analyze a lot of poor flips before you find the right one that will be profitable – be resilient
Know Your Numbers
- Ensure you are aware of all costs associated to Flipping a property. It is important to drill down to the (real) final numbers and profits after holding costs, realtor fees, taxes and/or GST if applicable. Our Flip Analyzer Spreadsheet Tool breaks down each of these costs, taking into account all costs of a flip to determine if it is likely to be profitable,
We are happy to share our case studies and Flip Analyzer Spreadsheet… email me today at firstname.lastname@example.org or call 403-999-4474
to complete an application and get prequalified before you start your search.