In conjunction with the rise in house prices, the profit potential for flipping a home in New Orleans is once more drawing the entrepreneur-minded.
Flipping a home is the process of purchasing a property—often
one in a rundown condition—then improving its value and reselling it for a
quick profit. Quick is the key word in
this strategy, since a fast turnover allows capital to be devoted to purchase
and renovation rather than operating and maintenance costs. It’s why successful
house flippers generally focus on quick gains over maximizing profits.
While this has proven to be a lucrative strategy in the
past, financing has always been the first major hurdle for anyone flipping a
home in New Orleans. If you’ve been noticing some of the inviting
house-flipping prospects in New Orleans, several financing routes sometimes make
such a deal possible:
Larger
Down Payment
Flipping a house in New Orleans in the current lending
market will often require a significant down payment. Since launching the
project might require at least 25 - 40% for financing, it’s essential that you prepare
sufficient cash reserves to complete the renovations envisioned—and successful
house flippers suggest you add 20% to
the cost estimate!
Seller
Financing
Seller financing—a mortgage provided by the home owner—is
also called a ‘purchase money’ mortgage. Sellers may be willing to provide
financing if they have had trouble selling their property, which is often the
case when a New Orleans home flipper believes its value can be greatly enhanced
by repair or remodeling. Seller financing would be more common were it not
necessary that the original owner own the home outright.
Hard Money
Loan
Hard money loans—also known as short-term bridge loans—are
another common source of financing for flipping a home in New Orleans. Hard
money loans are backed by the value of the property rather than the credit
record of the borrower, and typically feature a lower loan-to-value ratio than found
in a bank mortgage. The added risk has a cost: expect to provide a large
deposit and a premium for the loan (often 8% or more).
While sub-prime mortgages may no longer be as readily
available as they once were, there are still multiple sources of financing for entrepreneurs
who can spot profit possibilities for flipping a home in New Orleans. With real
estate prices continuing to rise, this spring again holds promise in the house-flipping
arena. Call me if you are interested in learning about some of the latest prospects!
Terez Harris NOLA Real Estate Group
(504)297-2619
Keller Williams Realty New Orleans 8601 Leake Ave. New Orleans, LA 70118 504-862-0100
Each office independently owned and operated. All brokers licensed in the state of Louisiana.
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