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Establish A Cash SourceWell, establish various cash sources to meet the needs of paying for all the improvements you plan. Or plan less improvements if you do not have enough money available to you to make the repairs you know need to be done..Plan to locate cash you can use for the improvements on the property well in advance of purchase. Don't be silly like one guy on a recent episode of a flip it program where he had no money for improvements after paying the down payment. He expected to get a home improvement loan. He spent months trying to get a home improvement loan. He never did get a home improvement loan.So line up your cash sources before you purchase a property. There is no reason to even buy a property to flip if you will not have the cash to make the improvements.You may think of credit card debit as a way to finance the improvements. That might be just the ticket to get you through. But be sure you have enough money to make the payments along the way when those credit card bills come due. Paying the minimum on many credit cards will add perhaps 18% to the cost of what you purchase. If you plan to do this, be sure to calculate in that added interest cost so the bottom line turns out to be the bottom line.You can certainly shop home improvement loans as a last resort. All you need to hurt your potential profit is yet one more monthly payment to meet.What you want to find is a property which you will need less cash inputs than you have, rather than a property where you do not have enough cash to make needed improvements before you sell.Sleepless nights worrying about payments will not be a pleasant activity. I speak from experience. One house I bought to flip took all the money I had. I went on to get more material from lumber yard where I had to make arrangements to make monthly payments with the folks there to get more material. Eventually I sold the property for very little profit because of carrying charges. I speak from experience. Arrange all the cash you need in advance.If you do not have resources of various sorts to meet the needs of your intended improvements, then find a different house to flip which needs less cash and more effort. Or do not do a flip until you can pay for all the repairs from cash on hand.
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Prepared 2006-2010 David Ullian Larson |