Harpreet’s perspective
Real questions. Real properties. Real numbers.
Watch enough renovation television and flipping starts to look simple: buy an ugly house, knock down a wall, install a fancy kitchen, sell it, and make $120,000. Credits roll.
Somewhere between the before-and-after photos, they forgot financing costs, permits, contractors, carrying costs, property taxes, insurance, selling expenses, unexpected repairs, and the fact that renovations have an incredible ability to cost more than the spreadsheet said they would.
Your Profit Is Usually Made Before You Buy
People often focus on what a property may sell for after renovation. I am interested in that too, but first I want to know what you are paying, the realistic renovation budget, financing and carrying costs, potential selling expenses, and a reasonable after-renovation value.
Then we stress-test it. What if the renovation costs $20,000 more? What if the project takes two extra months? What if the finished property sells for less than expected? If one small surprise destroys all the profit, we did not buy much of a margin.
Financing Is Part of the Investment
Some flips may work with traditional financing. Others may require alternative or private financing depending on the property, borrower, timeline, and overall transaction. Private money may be more expensive, but expensive money can still be useful if the project produces enough return to justify the cost and there is a clear exit.
If financing costs $25,000 and the entire expected profit is $30,000, I am going to ask uncomfortable questions. That is part of my job.
Know the Exit Before We Enter
Before arranging financing, tell me how we are getting out. Are you renovating and selling? What happens if the property does not sell quickly? Could you potentially refinance and hold it as a rental if the numbers and qualification work? Is there a realistic Plan B?
Hope is great. It is just not a mortgage strategy. Send me the purchase price, property, renovation plan, budget, and expected resale value before you buy. The mortgage has to serve the flip; the flip should not exist to serve the mortgage.