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Scale your Flips
House-flipping has been a solid investment, and frankly business model, for thousands of people across the country.
Right now the real estate market is at an all time high, which makes flips all the more lucrative.
I have tons of friends that bring in somewhere between $80k to $100k a year just off of three or four solid flips. Super smart move.
But this begs the question, if the model is so viable, and the deal flow is there, why don’t flippers do more projects?
Why are they only doing three flips annually?
I’ve observed that the biggest inhibitor is a lack of the required resources to make the flip happen.
For starters, you need sufficient capital to be able to acquire your targeted properties, and there’s not a ton of people that can just go around buying as many homes as they’d like.
On top of that you only have so much time to go about planning and carrying out the improvements needed to increase the value of the property.
So how can we jump this hurdle?
You guessed it, FUNDS.
Funds are going to give you THREE huge advantages to be able to scale your house-flipping business through the roof. No pun intended.
1. Close on Deals With Cash
A fund is going to allow you to have a major weapon in your arsenal in acquiring new properties.
Cash.
Rather than having to take out a crappy mortgage from the bank, or having to worry about going into a bidding war against competitors, you’re going to have some real funding behind you to pay cash for your homes.
Even if you don’t buy the entire house right off the bat, you’ll have enough capital to move the needle on multiple properties, which would have been extremely difficult to do flying solo.
Most people in the flipping business will use a syndication model, which is just dandy if you’re looking at doing two or three flips a year.
That’s because when you are working with syndications you basically have go through the same loop, or process, every time you want to buy a property.
You’ll have to raise the capital, come to terms, sign on the deal, and then get to work.
The next time a home catches your eye, you repeat the process.
It’s a very lethargic and time consuming cycle that prevents you from moving quickly and expanding.
With a fund you will go through the process ONE time, and then have a pool of money you can dip into every time you’re ready to move forward with a project.
It’s streamlined and readily accessible, making it the perfect model for a house-flipper.
2. Build out Your Team
This is probably the biggest resource you’ll have when looking to scale.
With the fund now in place you’ll be able to start creating new systems and teams to help the business grow.
As more people join you you’ll be able to deploy individuals to search out the best deals, take over the renovations, facilitate transactions, and continue to raise money.
Sure, you’ll have to take on some extra expenses to compensate all these new folks, but the productivity and increased work capacity will be more than worth it.
I’ve seen the results of this first hand as I’ve built out systems and teams for my own companies.
This has allowed me to grow my wealth and expand my business, while shortening my work week and list of responsibilities.
It’s a win-win for everyone involved.
3. Maintain Control
Lastly, when you’re working on a syndication basis you always run the risk of one of your investors pulling out, or even worse, forcing you out.
This is thanks to the legal structure that most syndications operate under, and tons of people have lost their positions in great deals that they started thanks to this.
That’s just another reason why the fund model is so appealing, because once you’re in and have all agreed on your PPM and LPA, you can ensure that you’ll be at the helm the entire time.
This brings serious peace of mind and gives you the flexibility you’ll need to make mistakes, pivot, and generate even greater profits.
Conclusion
All in all, if you’re seriously considering getting into the flipping game, or looking to scale, a fund is a no brainer.
Take the time to get acquainted with the best fund structures for these types of real estate deals and you will see a major uptick in your ability to pull off these deals.
It’s smart, it’s efficient, and it’s honestly your safest bet.
I look forward to seeing some awesome new homes around town as you go about fixing them up;)
Take Care,
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DISCLAIMER: This content is for educational and informational purposes only. It is not to be taken as tax, financial, or legal advice. You should always consult a legal professional before taking action. Furthermore, this is not a recommendation to buy or sell any security. The content is solely just the opinion of the authors.
