Thinking about purchasing a distressed property, fixing it up, and then reselling it for a profit? Flipping is a job with an uncertain income at the end. The bottom line is if you flip properties correctly, you can make money.

So, if you've decided to flip, the first leap is financing. Money is needed for the purchase of the home, renovations, and closing costs. (which will come from your profits).


Getting pre-qualified gives you an advantage because you know how much you can spend and what expenses can be rolled into the mortgage before making your decision.

There are traditional and alternative lending options available to help you achieve your house-flipping dreams. Talk to a mortgage broker to decide on the most practical method of financing.

If you go to a bank, there are a series of things you must adhere to. You may only meet some of their requirements.

The condition and life expectancy of the property begin to matter more on fixer-upper files. Sometimes, the house is just too far gone. Most banks will shy away from financing a property on amortization periods that exceed the apparent life expectancy of a home. A good broker can point out these issues before committing to a project like this to ensure you don't overextend yourself.

I'll help you assess your options and what's most important to you. It's a general rule that the faster you flip, the more profit you'll make. As part of our conversation, we'll discuss interest rates, loan periods, documentation requirements, and prepayment penalties.

We'll also talk about post-renovation refinancing. If you do such an excellent job with the reno, it might just make more sense to keep the place long term. Alternatively, this can sometimes serve as an added reality check to ensure you have more than one way out of the completed project you'd be willing to accept.

How much are you looking to borrow?

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To start, you need to understand the basic math of investing. You either buy low and sell high, or you buy well and keep for a while. Ask yourself, which one do you want to do, and how will your numbers look? Together, we can work out some scenarios and prepare you for your search.

Every investment comes with its own set of risks. We can consider mitigation strategies to help you manage some risks, but not all are inherent in a given investment. Real estate is no different. The plan you choose will have its own set of risks. How you manage or minimize them will depend on your unique approach.

Buying a property out-of-the-box means you’re not inheriting old problems, and the place will come with a warranty. As they say, the new car smell is never free.

An upfront conversation about your numbers can put some of these elements into perspective and help you plan your real estate portfolio around your goals, abilities, and lifestyle.

Cash flow is what you make every month minus what you spend. What you spend every month should include a buffer for any unplanned expenses (which you should be saving up for anyways). Positive means you’re in the plus and visa-versa.

The bank views cash flow-positive property as a more robust investment and is more likely to lend preferentially against it.

How do you estimate and budget for cash flow? That’s a more extensive conversation that we can have.

The answer is it depends. First, you should ask at least three people: your accountant, mortgage broker, and lawyer. There are considerable implications of doing so, but I’ll stay in my lane and speak only to the borrowing ones.

When you finance a property held in a holding company, there are rules you have to follow. In addition, you will:

  1. Limit your choice of lender and product options.
  2. Incur costs and be bound by some additional conditions of financing.
  3. Forfeit some privileges you may be otherwise entitled to when buying a property as an individual. And notwithstanding all of the above, it still makes sense to go the hold-co route for some specific scenarios.

Call professionals, take good notes, and run some solid numbers to make sure this makes sense for you - before you make a move. Ask to be referred to tried and true professionals who can help you improve the quality of the answers you get.

Investment concepts, where the outcome hinges on elbow grease or downright speculation, are often harder to sell to a lender. These projects will hold the operator (you) to a higher standard of financial ability to service this debt should your project hit choppy waters.

In contrast, opportunities, where properties have a strong cash flow and a solid long-term value projection, will be a lot easier. Financing costs will be lower, and the emphasis will be placed on the property itself rather than its investors.

A home equity line of credit (HELOC) is secured credit. Your home acts as a guarantee that you will repay the money you borrowed.

Up to a maximum credit limit, you can borrow money, repay it at your discretion, and borrow again. It typically comes with higher rates than their regular mortgage counterparts. You can best use them for consolidating short-term and/or recurring costs.

There are other factors to consider, and every situation is different. Talk to a professional to help weigh your options.