A fix and flip is an easy way to make money because there’s low risk with a high profit. What you may not know is that a seller can throw a wrench in your earnings when they see your profits on the closing statement.
Use these tips to handle strategic profit disclosure on your fix and flip to avoid costly mistakes.
Know Your Fix and Flip Seller
The seller you’re looking for in a fix and flip have to sell quickly and at a low price. As you develop a keener insight, you will learn when it’s good to disclose profits or keep them private.
Remember is that the seller has likely invested a ton of time and money into this home. Being compassionate about the seller’s loss will help you tap into their state of mind and choose the best strategy for disclosing profits.
When You Can Disclose Profits on a Fix and Flip
Be transparent with the owner about your profits if you sense that the owner will not resent you for it. If you do full disclosure you can save money and avoid further legal steps down the road. Even better, you could buy and sell it on the same day.
How to Hide Profits from Fix and Flip Seller
If you can’t disclose the profits, the next best scenario is getting paid in cash. Ask the buyer to pay the profit in an assignment fee! The cash will not be on the closing statement for the seller to view.
Otherwise, you may be forced to do two closings; one with the seller and one with the buyer. It’s can be quick but expensive. Transactional costs will decrease your revenue from the deal. You’ll keep the profit margin a secret from the seller but there will be a cost to you.
A buyer who is a loan buyer is not preferred because it excludes the two-close approach. A mortgage broker that can create a no-title-seasoning-requirement loan, but most loan underwriters don’t allow an assignment fee.
Do your research and your first fix and flip will be fun, easy, and profitable.