Flipping homes 101 – Holding your asset!
When flipping homes there is an enormous urge to cash in as quickly as possible. The work has no doubt been hard, and the agent has hopefully given you some good news that your homes value has gone up dramatically.
So is now the time to sell?
Well that depends on many factors including:
• Market prices
• Your need for instant profit or cash flow
• The type of property
If house prices are booming, then it would make sense to cash in as soon as you’re finished, and roll the profits on to the next house flip.
But I believe that house prices will continue to rise. Looking at the trends over the years indicate towards this belief.
In other posts, I have pressed the need to flipping your asset as fast as you possibly can. The reasons for such haste are simple: Mortgage payments and bills.
But if you are considering a different strategy, for a longer term period of owning your asset for high profit gain.Then this is how to do it.
The chances are that in ten years time your property price would have risen considerably. On average it’s around 10 to 15% of an increase, every year in some areas.
I’ll let you do the maths on your assets and you will see that owning property is a fantastic investment.
But what about those mortgage payments and accumulating bills? I hear you cry.
Well if you decide to go for the long game and high back end capital gains, then renting your home instead of selling it after the flip, could make you a monthly passive income on top of the final inflated profits many years later.
Let your tenant pay your mortgage, expenses and even pocket a well earned profit until you think the house prices are at levels great enough for you to be happy to cash in.
However, there are no right or wrong answers when it comes to flipping homes. You may be flipping a home in an area where the rental market is in low demand. You may need to get your hands on the cash to fund another flip.
It is possible to pull money from a property without selling it.
Once you've finished the flip, have the bank revalue your property. If you have purchased well, then your asset should have gone up in price. You can then ask to borrow additional funds against this increased value as a deposit for the next property to flip.
You can do this every time your asset rises in value as long as the mortgage product allows for the facility of extra borrowing. Fortunately most lenders do include this feature into their deals.
Essentially the banks will be financing your future purchases. Pretty good if you ask me!