Raise your hand if you’ve ever dreamed of quitting your job and doing something that requires your attention for only part of the year, so that you can rest or travel the rest of the time? How many of you have had this fantasy existence of spending your days on a tropical beach, while business takes care of itself at home?
For some, flipping old businesses sound like a great idea. Invest now in purchasing the property, fix it, and play for a while, then do it all over again. But before you get too excited after watching a couple of HGTV episodes, there are certain factors you must keep in mind.
1. Make sure you have the money to do so.
Don’t go into debt trying out this trend, to see how it goes. Yes, in theory, you’re buying an ugly property, make it look good, then sell it for a profit. But in addition to the down payment for the building, you’ll spend a pretty penny on materials and repairs. Study well the numbers, to make sure that you’re not just breaking even, or worse, losing money.
2. The mortgage interest rate will be higher.
If you’re purchasing an investment property, be aware that the mortgage lender will require a higher interest rate than if you were buying a residential property, or even a second home. You’ll also be expected to come up with a higher down payment. The reason for these additional expenses is because since you won’t be living in the property, lenders will consider the loan to be a riskier one: If push comes to shove and your finances take a nose dive, would you choose to continue paying for your home, or for the investment property?
Don’t even think about lying to get a better rate. That’s called occupancy fraud, and if the lender finds out, they could demand immediate payment of the remaining mortgage balance. And that’s in a good day. It could also be considered bank fraud and the consequences could be criminal charges.
3. Have a good team.
For your project to be successful, you have to have the right mortgage broker, real estate agent, contractors, and probably even a good lawyer. Cover all your bases before making such a substantial investment.
Speaking of contractors, you want to make sure you get a feasibility study, a site survey, verification of permits, a detailed estimate… Get all your ducks in a row with the right company to prevent having to pay extra for someone else to fix a mediocre job.
4. Keep in mind the surrounding neighborhood.
If you purchase a property in the middle of Skid Row, it doesn’t matter how luxurious you make it out to be, no one’s going to pay a pretty penny to live in a high crime area.
The bottom line is that flipping properties can be a profitable business, if you know how to do it right. Contact Eclipse Building Corp. for your renovation. We can assess the entire project and let you know everything that needs to be completed, from point A to point Z.