"...Youuu may have a resale problem": Finding good deals vs bad deals

The ultimate million-dollar question in the fix-and-flip game is echoed by Glinda’s query: “Are you a good witch or a bad witch?”

Since hard money lenders lend based on the qualifications of the property and not necessarily the lender, thousands are attracted to the “no impeccable credit score, no collateral? - no worries!” mantra of the industry. What many rookies fail to realize is that fixing and flipping is…well, not for rookies! It’s important to be educated, not only on the ins and outs of rehabbing, but on what makes a deal the ultimate deal.

Here are some KEY QUESTIONS to consider when determining the value of a deal AND which items can spoil a deal faster than mayo left in the sunshine:

• 1.   Is the property manufactured, mobile, rural, agricultural, recreational, or owner-occupied? – Basically, if you have a mobile timeshare with its own manufactured beet farm and a family of 5 currently living there...youuuu might have a resale problem.
• 2.   Does the property have significant mold issues, fire damage, a history of methamphetamine use/manufacture, foundational problems or roof issues? – Basically, if you have a moldy meth lab with half a roof, which you bought after the great Chicago fire, built on a major fault line…youuuu might have a resale problem.
• 3.   Is the property less than 900 square feet or are you adding to the building or adding new exterior walls? – Basically, if you have a shoe box you’re currently converting into the Taj Mahal…youuuu might have a resale problem.

Other things to take into considerations are the items which may not necessarily KILL a deal dead, but do add to its overall risk factor. These considerations mostly have to do with location, location, location, and as we know, location could kill a deal just as quickly, depending on the potential buyer. Ask yourself these questions:

• 1.   Is the property in a high-crime area, within 100 miles of the coast or has it been vandalized? – Basically, if you have a graffiti-ridden shack on the beach which used to be the home of Lucky Luchiano…youuuu might have a resale problem.
• 2.   Is the property near a commercial building/area or on a major street? – Basically, if you have a home next door to the local mega-mall literally ON route 66…youuuu might have a resale problem.
• 3.   Is the property in a high rental neighborhood, a neighborhood where the average selling days on the market are 120 days or longer, or there’s more than one boarded up house in the neighborhood? – Basically, if you have a property in a condemned ghost town…youuuu might have a resale problem.

Remember: the risk score affects points, interest and the loan amount you can get. So, make sure you do your homework and err on the side of caution when it comes to qualifying a good deal!

Realistically speaking, good deals are hard to find. Most likely, you’re going to go through a lot of frogs before your find your prince. 

The best hard money lenders will help you identify what makes a deal the most profitable AND will keep you from getting stuck with a lemon that will sit on the housing market collecting dust. Finding a reliable and trustworthy lender is just as important as finding a good deal. Would Cinderella trust her wicked stepmother to magically poof up a dress and carriage so she could go to the ball? Don’t think so. Make sure you also do your homework regarding hard money lenders.

So, here's your homework assignment when it comes to house flipping: answer questions 1 – 6 to make sure the deal is GOOD. Also, do a thorough check on your hard money lender. Remember: a good one will have YOUR best interest at heart and will do whatever it takes to keep you from getting stuck in a bad deal.

Want to know more about hard money lenders? Check out this competitor comparison blog post - THE HARD MONEY HUNGER GAMES