What is a Mortgage Flip?

house flipping mortgage

DEFINITION of ‘Flipping’ A type of real estate investment strategy in which an investor purchases properties with the goal of reselling them for a profit. Profit is generated either through the price appreciation that occurs as a result of a hot housing market and/or from renovations and capital improvements. A house flipping mortgage is usually required to facilitate this process.

Purchasing a revenue-generating asset and quickly reselling (or “flipping”) it for profit.

Here is our underwriting philosophy: if it is a Profitable deal we want to be involved.

1. Profitability is our first underwriting filter: Will you make money?

2. We do that by valuing the property as if completed with the renovations planed, which is why we require the budget and description of renovations.

3. We ask for a minimum of $10,000 down. On a rare occasion where we think the profit margin is slim, we may ask for more money down, but we are more likely to discuss with you why you think the profit is higher than we do, and ensure it is the right investment decision. We would prefer not to help you do poor deals and risk you losing money as well as ourselves as no one wins.

4. You cover the cost of renovations on your own. In cases where the renovations costs are high, we may consider a draw mortgage for part of the renovation. Usually this is secured by other real estate, or it may be structured more akin to a construction mortgage.

5. You must make monthly interest only payments at 15.5% simple interest.

For the first deal, application, employment information, confirmation of cash to complete the renovation and credit is required. We’ll do that exercise annually after that.

We prefer to have a full net worth statement for applicants who are real estate investors: We want to know the portfolio details (addresses, mortgages, rental income etc).

On all deals we require the following:

1. Purchase agreement

2. Renovation budget and details

3. Most recent NOA

Please don’t hesitate to contact us if you have any questions or concerns. We look forward to working with you. Once we get the application From you we will email you our flip analyzer spreadsheet. The sheet is designed to calculate all the costs in a flip to decide A. if it is profitable enough at a certain purchase price or B. if based on a certain profit objective, what the maximum purchase price can be for the property. All variables that a borrower needs to input are highlighted in blue in the spreadsheet.

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house flipping mortgage
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