How do you get out of a flip that’s not selling?

Question

I have a property that has been on the market since November in Spring, TX. Took a hard money loan out on it to cover purchase and repairs. Hard money loan is about to expire. I know what my lessons learned with the property are. However, what are some strategies you would suggest to get out of this bad situation?

Lien Vuong · Answer

Try to get into traditional financing and renting the property out. Perhaps it would be good to get a lease to own tenant also to hold the property without further bleeding.

Jonathan Greene · Answer

I think everyone is asking the wrong question. Why do you have a flip still on the market at the expiration of your Hard Money loan? There are only two reasons and they both might apply 1. The renovation wasn't good and/or 2. The price was set too high and you are being stubborn about lowering it because you don't want to lose money on the deal. There is always a price. What has the feedback been? Too many flippers know what their mistakes were, know they overdid it, but sit there with a house on the market thinking someone is going to save them. Each day it is still on the market makes it less valuable, especially as a flip. Cut the price and cut your losses before sinking into another loan to rent it for years and get no return.

John Teachout · Answer

You didn't indicate what you feel the issues were that got you into this situation but it's common for people to 1. Overestimate the ARV. 2. Underestimate the renovation cost. 3. Underestimate the time period required to flip the property, thus increasing holding costs.

My guess is that it's all three. You're in a pretty large club if that fits your situation.

Pete Storseth · Answer

Not necessarily "traditional" lenders though.  Call smaller banks and credit unions to see what they have. If alls well, get one to approve the refi, then take that quote on to another bank or CU and get them to beat it. Then go to another and so on until the numbers work.

Brian Pulaski · Answer

Drop the price and get it sold. Nearly any house will sell when prices right (or low).

You can try and refinance it and rent it out. Keep in mind there are hurdles there too. If it isn’t selling it may be overpriced and when you refinance you may not get the value out of it you expect. Hopefully you get enough to pay off the HML at a minimum.

Dave Charron · Answer

Somewhere between $1 and what your asking is where this will sell.  Keep dropping until you hit that number or rent it out.  Only 2 options you have.

Scott Anderson · Answer

Rent it IMMEDIATELY. Then refinance into 30 year with the leases income.

Try to sell again at lease expiration. Or hold forever and build wealth.

Pete Storseth · Answer

@Theresa Harris

Might even fall in love with cash flow

Theresa Harris · Answer

Another vote for getting traditional financing and turning it into a rental.  You can then sell it in a year or two during the spring or summer when people are more likely to buy a home.

Corby Goade · Answer

Would it cash flow? If you could refi with conventional lending and get a renter in there it could help you turn things around. Always have at least two exit strategies, it's too stressful to have HM hanging over your head.

Best of luck!

How do you get out of a flip that’s not selling?

Most Popular Reply