1st Fix and Flip

[Pepper2006]

We are about to embark on our fix and flip.  We’ve found a house that is currently in foreclosure and is about to be listed with a realtor we are friendly with.  She tells us that the bank is hoping to sell the house for $110,000 to $120,000 it needs about $30,000 in updates.  Comparable houses in the area are selling for $215,000 to $225,000.

We are planning to use our Home Equity Line of Credit on our house to initially finance the purchase.  Once the sale is complete we plan on taking out a Line on the new house and paying off the line on our own home and using the balance for repairs.  

This sounds like a no brainier to us but I’m interested in any input anyone may have.  

How does the financing arrangement sound??

-Laney
 

[marcus335]

It sounds good.  Just make sure your numbers are very accurate.  Don't forget about transaction costs and holding costs.  Most people say add 10-15% to your rehab costs because you will normally go over.  

Make sure you have enough cash to pay on your HELOC while you are holding this other property.  It'd suck to lose your home by using it to finance an investment.

[Dan732]

Now get a contractor and make sure that 30K figure is 30K not 60K