OfflineHi. I'm a newbie and this is my first post. I'm looking for advice on exit stragies for a particular deal. Essentially I have an agreement in place but have not locked up the contract, yet. I have a rehab crew ready to do the necessary work and take payment on the back end, and an agreement with the seller that gives me 30 days to rehab and another 30 days to sell.
Since I'm new to this I do not have a true buyers list ready to go so my fear is that 60 days from now I won't sell the property, the contract will expire, and I'll be on the hook for the rehab costs.
Besides the obvious (get an investor), does anyone have any advice on how to protect myself against this situation? I'd appreciate any thoughts. Thanks!
-Tom
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Think about your exit strategies. How are you going to pay your contractors when they are done with the job? How often are homes turning over in that neighborhood? How long are listings staying on the market in that neighborhood? These are things you need to take into consideration! Also be prepared for the unexpected with your rehab. Do you need permits? If so, get these pulled ahead of starting the gut work (tearing out)? Make sure you are using licensed, insured and bonded contractors to do your rehab! God Bless with your REI and flipping.
Since I'm new to this I do not have a true buyers list ready to go so my fear is that 60 days from now I won't sell the property, the contract will expire, and I'll be on the hook for the rehab costs.
Besides the obvious (get an investor), does anyone have any advice on how to protect myself against this situation? I'd appreciate any thoughts. Thanks!
-Tom
"I will NOT BE BROKE! ANYMORE!"
In the name of Allah, the Beneficent,
the Merciful.
22.He is Allah besides Whom there is no God: The Knower of the unseen and the seen; He is the Beneficent, the Merciful.
23. He is Allah besides Whom there is no God: the King, the Holy, the Author of Peace,the Granter of Security, Guardian over all, the Mighty, the Supreme, the Possessor of greatness. Glory be to Allah from that which they set up (with Him)!
24. He is Allah: the Creator, the Maker, the Fashioner: His are the most beautiful names. Whatever is in the heavens and the earth declares His glory: and He is the Mighty, the Wise.
Thanks, that makes a bunch of sense! Everything you mentioned is in place except for the permits- they won't be pulled until a contract is signed. As I said earlier, the contractor gets paid when the property is sold. I'm more concerned with my method. Are other REIs practicing this strategy? With all considerations, there's never a solid guarantee that any property will sell in a set time frame so I'm really wondering if other investors would take the risk on this strategy.
-Tom
When rehabbing a property you pay the contractors coming on job as they complete their perspective jobs to your satisfaction. You don't want to be in the situation where a contractor can put a lien on your project. Cause you won't be able to sell until the liens (clouds) on the title are cleared. What happens if you don't sell within the prescribe time frame you estimated to sell the house? How long are your rehabbers willing to wait to be paid for their skills? They have families and/or BF/GF and other obligations that need to be taken care of. Find hard money or private money to pay your contractors as they complete their jobs and buy the property, of course. So you don't have that shadow cloud hanging over your head while you're trying to sell the property.
"I will NOT BE BROKE! ANYMORE!"
In the name of Allah, the Beneficent,
the Merciful.
22.He is Allah besides Whom there is no God: The Knower of the unseen and the seen; He is the Beneficent, the Merciful.
23. He is Allah besides Whom there is no God: the King, the Holy, the Author of Peace,the Granter of Security, Guardian over all, the Mighty, the Supreme, the Possessor of greatness. Glory be to Allah from that which they set up (with Him)!
24. He is Allah: the Creator, the Maker, the Fashioner: His are the most beautiful names. Whatever is in the heavens and the earth declares His glory: and He is the Mighty, the Wise.
Thank you for your comments. I appreciate your advice.
-Tom