Housing Demand Shortage Pays Off For Fix-and-Flips
The real estate market is booming these days as a result is a shortage in good housing inventory for buyers to choose from. With limited stock available, especially of move-in ready homes, investors are jumping in and improving existing properties and selling them for a profit. Competition is cutthroat, especially among real estate investors who have the ability to make cash offers. Fix-and-flip financing is one solution that can help you stay competitive and take advantage of the current real estate market.
Housing Stock Expansion Through Renovation
With sales prices going up and inventory going down, home renovations will be critical for expanding the housing stock. Although new home construction will also contribute to building inventory, it takes longer and costs more, especially with the current labor shortage and high price of materials. New construction also requires a larger variety of materials because you’re starting from scratch. When renovating, you might just need lumber, drywall, paint, and other finish materials, but a new home needs plumbing, electrical, and more.
Whether you do some of the work yourself or outsource it to qualified contractors, renovating a distressed property is often more cost-effective than building a new home. When done right, it also offers the potential to make a nice profit. Although it’s true that profit margins on renovations may not be as lucrative as new construction, with increasing labor and materials costs, they are definitely less risky.
Renovations also have some built-in risk mitigation that many other types of investments don’t have. If the market shifts during the renovation process, you can always hang on to the property as a rental to generate income until prices go back up.
Most people don’t have the cash on hand required to invest in renovations, so they have to borrow it. In many cases, a conventional mortgage is not an option, either because of the borrower’s finances or because of the condition of the property. Trust deeds are designed to cover a portion of the purchase price of the home and the renovation costs. They are typically short-term loans because the intention is to sell the home within a certain time frame. However, if you decide to keep the home as a rental or you need more time to renovate, you may be able to get a traditional mortgage with better rates and longer terms.
Coastal Capital is a trust deed lender that offers fix-and-flip loans to real estate investors with a broad range of experience levels. Whether you’re a seasoned investor or are just starting out, our team can help you get the financing you need to achieve your investment goals. We offer loans throughout the country, and our personalized services allow us to build long-term relationships with borrowers, so you know we’ll be here for your next project.
To finance your first or fifteenth fix-and-flip, give us a call: (310) 280-9173