If you’re an investor in Houston, fix and flip investing is a great way to get started in real estate even when you have only a little capital. When done right, this strategy has the potential to produce generous returns.
What is Fix and Flip Investing
In this strategy, a real estate investor buys a property that is prime for rehabilitation, taking into account the location, the estimated cost of the renovation, the salability, and the real estate market condition in the area. Once you’ve considered these factors, you have to be ready with your financing options. Either with your own money or through fix and flip loans from reliable hard money lenders.
While in the process of fixing the property, you should already be looking for potential buyers of the property. After the rehab or the “fix,” you can then sell or “flip” the house to realize a profit.
Factors To Consider On Flip Fix and Flip Investing
Making a profit in this business requires you to consider factors that can directly affect the value of the property after the rehab. Having a good feel of the market and realistic ARV estimates will also give you an idea of whether you can turn a profit within a respectable period. Thoroughly evaluating your financial position and the market situation will help in determining how profitable your first fix and flip investment will be.
With this in mind, it would be helpful to take a good look at the following factors that may influence your project:
- The condition of the real estate property will give you an idea of what needs to be repaired, changed, or improved to make it sellable or marketable.
- With the condition taken into account, you should keep in mind a rehabilitation budget. Influenced by current trends in the real estate industry, materials, fixtures, and sometimes even the furniture you are to include in the sale of the property. You might also want to control rehabilitation expenses, or else you might run out of funds.
- The time frame is another factor to be considered in the rehabilitation plan. Any work extending beyond the time frame could also mean additional loan interests and more rehab costs.
- Property Location is one factor not to miss in looking at properties for rehabilitation or Fix-and-Flip projects. The location plays a good part in the decision process of would-be buyers. Having an idea of the real estate market situation in the area will also work to your advantage.
- You should also consider the source of funds for your project. Fix and flip loans providers can help your cash flow to start the project.
Advantages of Fix and Flipping Houses in Houston
1. City Profile and Real Estate
Houston is the fourth-largest city in the United States in terms of population. An article at Houston.org states that there are now more than 1 million new residents in Houston compared to a decade ago. The Houston population is diverse and represents a kaleidoscope of cultures. The website further states that it is home to the number one trading port in the United States. There are also more than 20 Fortune 500 companies with headquarters within the city perimeter. More than 300 tech companies also have their offices in Houston. The dynamics of the city has been instrumental in the increase in sales of houses. An article in Click2houston.com stated that increases are more pronounced in home prices ranging from $250,000 to more than $750,000. The said increase in sales has also depleted the inventory of houses that are in the market. That being said, there is a big opportunity for fix-and-flip real estate projects in the Houston area.
2. Financing Options for Fix and Flip: Quick Hard Money Loans in Houston
Houston is a big city, and it is home to many commercial and traditional financial institutions, both local and foreign. There are also direct hard money lenders ready to serve the growing real estate investing niche of the city. With the dwindling supply of available real estate properties in Houston, it’s beneficial for investors to secure loans in the shortest possible time. Leveraging on the loan services of Hard Money Construction Lenders, works to your advantage because of a relatively faster process compared with traditional lenders. A Hard Money Rehab Loan for your project can be secured within 14 business days, with an additional of 1 to 3 working days for the release of funds.
Securing fix and flip loans when time is a crucial element in your project is best from Direct Hard Money Lenders. Unlike traditional or commercial financial institutions, these lenders make it a lot easier for you to realize the funding for your rehab project within a much shorter time. These lenders usually consider the collateral as the main factor for your loan thus, giving you bigger chances of getting approved faster. However, they may also give points on other factors that are crucial considerations for traditional lenders.
3. How Much Can You Borrow?
As an investor, what you may get from the lender is a percentage of the appraisal value after rehab, also known as the ARV or After-Repaired-Value. The maximum loan-to-value amount or LTV you can get is 70% of the ARV, so you must have funds to cover the remaining 30%. Sometimes the LTV ratio of 70% exceeds all the funding needed; this is a classic example of no money down fix and flip loans. To illustrate, see the figures below:
Purchase Price: $75,000.00
Repairs/Fix-and-Flip Cost: $45,000.00
Total Cost: $120,000.00
ARV is $175,000.00
LTV = Total Cost / ARV or 70%, which is the maximum LTV you can get for the project.
In this case, the funds needed for the project total $120,000.00, while the maximum LTV 70% is $122,500.00. This means the Loan to Cost (LTC) is 100%. All of the costs to rehab the home can be covered by the loan. However, this doesn’t account for closing fees for the loan.
To read more about loan related fees, you may check out this handy guide.
4. How to Apply For Fix and Flip Loans in Houston
Quick Hard Money Loans ensure that you get fundings and buy that available property as quickly as possible. You can also finish your real estate rehab project in the shortest possible time that allows you to enjoy a robust real estate market and realize a profit the soonest. Hard Money Construction Lenders can support you in this endeavor.
Get A Fix and Flip Loan in Houston Now
One respected lender based in Houston is GL&L Holdings. Our company can help you realize your projects and offer you competitive interest rates and services in the Houston area. To make it easy for you, we have included an application portal on our website that you can fill up for pre-qualification. We will get back to you within 24 hours to update you on the status of the pre-qualification.
If you pre-qualify, you will need to prepare all the necessary documents such as the following:
- Purchase Contract
- Closing Statement
- Formal Appraisal and Inspection Reports from reputable agencies
- Bill of Materials
- Scope of Work
You may also have a copy of your proof of finances ready for the evaluation. The whole process of loan evaluation shall take a minimum of 7 days to a maximum of 15 working days. After the approval, reserve another 1 to 3 days for the processing of fund release.
At GL&L Holdings, we make it easy for you to go through the whole process of securing fix and flip loans for your real estate projects. Our support on your projects does not end even after the loan release.
Feel free to come to us or give us a call for your real estate needs. Our doors and our lines are always open for you. You can also read our blog to know more about the business and the real estate industry.
