Time is money — this is certainly true in the world of real estate investing. Losing out on a deal due to obstacles in the closing process is a costly challenge many investors face frequently The longer it takes to find a good fix and flip deal, secure financing, and close, the longer it’s going to take to renovate, sell, and generate profits. Here are four factors that can prolong fix and flip closings, as well as some tips for speeding the process up.

Factors That Can Prolong Fix and Flip Closings

1. Finding a Property to Fix and Flip

Tracking down a good property to purchase is only a tiny piece of the puzzle. While there may be many potential properties for sale, not all are good deals. And the ones that are good deals are often gone before you even know about them.

Speed it up:

Create strategic partnerships with those who have access to great investment deals before they even hit the market. Partnerships like real estate agents with great relationships in the community or bank asset disposition managers can give you early access to great opportunities.

2. Getting Under Contract

Getting a good fix and flip property under contract for the right price can be challenging.  Competition is strong for good deals with many inexperienced investors willing to overpay to win the deal.

Speed it up:

Make your offer more attractive, even if it isn’t the highest bid. Offer the seller “all cash,” which you can if you are working with a private or hard money lender. Offer a quick close and wave contingencies to assure the seller you will close the deal.

3. Securing Financing to Purchase the Property

In order to get financing from a lender, you need to have a number of things set up in advance, including:

Underwriting documents
Lenders will require a certain set of documents to underwrite you as the borrower. These documents may include some or all of the following: entity documents, track record/experience documents, liquidity proof, tax returns, and credit score.

Speed it up:

Pay close attention to the required document list from your lender and get them to your lender as soon as you can.

A business entity/LLC
Most lenders will require you to form a business entity in order to purchase, renovate, and sell the property. Due to consumer lending licensing requirements most private lenders can only lend to a business, not an individual.

Speed it up:

You can use state websites or other national third party websites, such as legalzoom.com or incfile.com, to set up your entity and receive the appropriate proof rapidly.

Evidence of sufficient liquidity
Most lenders will not lend you 100% of the funds needed to purchase and renovate the property. You will need to provide proof that you have the “skin in the game” required.

Speed it up:

Make sure to have bank statements, brokerage, or IRA statements prepared ahead of time to show you have the capital necessary to purchase the property.

A clear scope of work for the renovation project

Your lender will want to see that you have a clear plan in place as to how you will renovate the property, as well as specifics to how you plan to increase the value of the property.

Speed it up:

Have a clear and detailed strategy and demonstrate how you plan to rehab the property. If the lender requires it, use their “scope of work” form to accelerate this step.

1. Waiting for the Appraisal/Inspection/Title Work to Come in

Most lenders will require a full appraisal and inspection on a fix and flip project. Appraisals can take anywhere from 5-15 business days to be completed and returned.

Speed it up:

Work with your lender to have them order the appraisal and inspection as soon as possible. Ensure that the title work is ordered at the very beginning of the process as well.

Close Your Next Deal in 10 Days

The most successful real estate investors close their deals in 10 days or less. Find out how you can do the same by joining our live webinar “How to Close a Deal in 10 Days” on December 12th.