High-end Fix and Flip
It takes keen knowledge of the neighborhood and confidence in your contractor resources to achieve the type of success recently enjoyed by Kris Conover.
When investors think of flipping houses, they usually think about foreclosures and short sales. They also have a stereotype in their heads about the kinds of people who get foreclosed on and the kinds of properties they own. As a result, they might completely miss an amazing opportunity in the high-end flipping market. Whether they’re foreclosures, short sales, trust sales, or they just need a lot of work and the owners need to walk away from them, these houses can offer advantages over lower-end properties.
The property located at 1451 185th Ave. NE, in Bellevue was one such property. The house had been damaged by fire. The owner embarked on a ground up rebuild and got in over his head. The unfinished home ended up on the MLS. The scale of this project and the high-end values in this neighborhood might deter the average fix and flip investor. A loan of almost $1 million is hard for most investors to consider. In this case, it comes down to knowing the neighborhood, the current market and having a great financing partner. Working as both a developer and broker, Kris knew that most buyers driving through this neighborhood are thinking “I want to live here” not “how many locks do I need on my front door”? With a high-end project you take on more risk, but you also stand to reap a greater reward. Kris knew that with financing options from Veristone, he could knock this one out of the park.
Kris was able to acquire the property for $725,000, utilizing a seller charge-back for the full down payment. He employed a strategy leveraging interest reserves for the full project time frame, taking a fix and flip loan for $967,271.29 to finance all remaining construction; an amount coming in at $360,000. As a testament to good work and a sizzling hot real estate market, the property was listed at $1,550,000 and in under 3 weeks had a contract for $30,000 over list.
How does the profit from this deal stack up you ask?
According to the Q1 2016 Home Flipping Report from RealtyTrac® (www.realtytrac.com): Homes flipped in Q1 2016 yielded an average gross profit of $58,250, the highest average gross flipping profit since Q4 2005 — a more than 10-year high. The average gross flipping profit is the difference between the purchase price and the flipped price (not including rehab costs and other expenses incurred, which flipping veterans estimate typically run between 20 percent and 33 percent of the property’s after repair value).
So yeah … this high-end deal yielded a gross profit better than 5x the going national average ($$$).
Are you considering a high-end deal? Let Veristone Mortgage help show you how it can be done. Contact a Veristone loan expert today to learn more.