There are few things in business as thrilling as selling a flipped property for a handsome profit, but what happens when you’ve renovated a property and it simply sits on the market. If you have a hard money loan on the property, you can practically hear the interest ticking up as you pray for someone to buy your flip. This scenario happens…even to the best real estate investors, but what can you do to get out from under the albatross.
Getting stuck with a flip that won’t move is frustrating. Not only might you not make much of a profit, but you can quickly find yourself in negative territory. There are solutions to the problem. One of the best solutions is to refinance the property in order to take out the hard money loan in favor of a lower rate with a lower payment. You can then rent the property out to cover the debt service and, when the time is right, you can revisit selling the property. You might even enjoy some appreciation of the property’s value.
One of our prolific flipping clients runs into this scenario periodically. We were able to help him set up a “guidance line” with a national private lender at lower rates for just such an occasion. When a flip doesn’t sell in a reasonable time, we simply call the lender and they advance the funds to pay off the shorter-term loan. We fill it with a renter and add it to his rental portfolio. It’s worked out quite well for him and it might be a strategy that you would choose to employ.
When a flip doesn’t sell, it’s not the end of the world. It just depends on how you react to it.