FIX AND FLIP VERSUS BUYER – RENOVATE – REFI
June 6, 2017 By Larry Arth
As a guy who has to always be on the move and doing something, adjusting to the changing tides that make up real estate investing is something I find to be exciting and a little challenging. (Hey, the two go hand in hand right!)
Prices rising and rents stabilizing
As prices continue to rise and rental rates begin to stabilize and level off, it gets harder to find investments that make up those double digit returns we have grown so fond of.
This has more and more people looking to do fix and flip investing. There are challenges with these fix and flips and, of course, we have solutions as well. Let’s look at both.
Fix and Flip (The Challenge)
I get calls every day with frustrated investors trying to find good fix and flip properties. They struggle to find a decent property and when they do they are gone in a flash. The flippers challenge:
· Challenge: Finding flip worthy properties for a decent price
· When you do find them they are sold before you get a chance to check them out
· Challenge: Finding trustworthy tradespeople and contractors who can get to you on a timely basis
· Challenge: Merging flips within the best investment markets because you cannot successfully flip in an area you do not live in as you are not there to monitor the activity and finding project managers is often cost prohibitive
· There are many unknowns. Risks are always elevated when you do flips as renovations often come with surprises.
The Solution. Buy-Renovate-Refi
With a variety of investors who all have different objectives the Buy-Fix-Refi may not work for everyone, but it certainly has proven to be the ticket for many of our investors who have favored the fix and flip model. Essentially the Buy- Fix-Refi model works like this:
· You buy a distressed property from one of our affiliates who buys hundreds of properties annually using economies of scale buying power to get the best deals. (these are cash purchases)
· The affiliates have their own renovation crew with a proven system of what to do and knowledge of what renovations will cost so the work environment and timing is always controlled. Again, economies of scale pricing on material allows for more cost effective renovations. These renovations and costs are all determined and agreed upon up front so no surprises and work is done by taking draws that are also established up front.
· When work is complete you have instant equity. You can buy a home, renovate the home and then put a loan on the property based on the new increased appraised value of the property. This essentially allows you to pull most of your cash investment back out of the investment so you can repeat for more profits.
· While it is possible to sell for a profit the best return on investment comes from accelerated cash flow. As your acquisition price was low the cash flow is large, providing for both large cash flow with very little out of pocket money as you financed most of your cash back out so you can repeat the process.
Added benefit of the Buy-Fix-Refi model:
· Reduce risk as proven systems have been made, renovations are more of an art than a guess
· Guarantee upside: Seller guarantees the property will appraise for more than you have invested in it or will buy it back
· Guaranteed renovation cost: The price you are quoted is the price you pay.
· Guaranteed completion date: 120 day completion seller starts paying you full rent on day 121
· Guaranteed rent amount: The day you buy the house you will know what your rents will be or the seller covers the difference
· Guaranteed maintenance free for the first year: Seller covers all labor and material for any maintenance for the first full year.
· Guaranteed rent for one year: Seller is so confident in his property management team you will collect 100% of the first years rent whether full rent is collected or not
· 3 year guarantee on all manufactured warrantied items including any brand new stove, refrigerator, microwave, washer dryer, dishwasher, water heater that the unit is furnished with
· 10 year guarantee on roof provided by the roofing company
Buy-Fix-Refi model is less risk and less stress
You can probably easily see why so many find this Buy-Fix-Refi model to be an easier, less risk and less stress than a conventional fix and flip alternative. Most importantly you can do this in an investor advantage market so you can enjoy the equity growth.
Strategy with Larry
There is much I can share about this, so feel free to contact Larry at (941) 718-7761 for a complimentary 15 minute strategy call to see if this model may be right for you.