Fix and flips can be very lucrative…this sort of goes without saying as there wouldn’t be numerous cable shows dedicated to them if they weren’t. If you’re a potential Los Angeles fix and flip investor who maybe doesn’t know much about real estate, or possibly even less about fixing up houses, we’ve compiled some advantages and disadvantages of fix and flip investing to help you determine if this style of investing is for you.
The biggest advantage to buying a potential fix and flip is simple, you should get a good deal on the property. Properties that need work or rehabilitation can be purchased at a discount relative to market pricing. Generally speaking, the more work that a property requires, the bigger the discount.
In the past it may have been difficult to find financing to purchase a property in Los Angeles that needed rehabilitation. In fact, if we’re talking about 10 years ago, you may have had no available options for financing a fix and flip on the heels of the financial crisis. Things are obviously different now…the housing market recovered, and you have options when it comes to obtaining purchase financing for your fix and flip.
CIVIC has financing programs available for fix and flip investors. Namely, a 1-year program, with no pre-payment penalty, and interest rates starting at 7.99%. This program gives you the flexibility, and affordability, to finance your fix and flip investment purchase.
There aren’t a lot of investment options that can potentially return 20% or more on your investment within a short time frame like 90 days. All investments inherently come with some level of risk, but few offer the upside of a fix and flip. There’s a reason that cable television has turned this type of real estate investing into quite the phenomenon. Seeing everyday folks turn relatively short-term profits of $30K, $50K, and even $100K makes for great television…but do keep in mind that it’s not as easy as it looks, and we’ll dive into that right now!
It can be tough to find good contractors at a reasonable price. This may be your biggest roadblock when planning your fix and flip. It is easy to find expensive contractors but much harder to find affordable contractors who do good work.
If you find a good deal on a property, and successfully obtain financing to purchase it, that doesn’t mean you won’t need cash on hand to complete the rehabilitation. When you see TV shows where the buyers have a $150K remodeling budget, keep in mind that those dollars obviously have to come from somewhere. You may be able to obtain financing to offset some of the remodeling costs, but chances are that you’ll need a fair amount of capital to pay for the work being done.
If you are planning to live in a home, waiting until the work is done and contractors are out is semi-tolerable. If you are an investor, every day that goes by is money out of your pocket. It is not easy to buy a house that needs work, and commit the time to ensure the project is completed properly, but if it were quick and easy to make $50K in a single transaction, everyone would do it.
If you’re contemplating a fix and flip investment in Los Angeles, give us a call at 877-472-4842…we’d love to sit down with you and discuss your strategy along with any financing options we have for your investment scenario.
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