My father’s wife (my stepmom) has inherited her family home…
Along with her brother and sister. The brother is currently living in it, but it is in terrible shape. As is, the property has been estimated by a professional to be worth approx $350k. It seems like comps in the area in good condition sell for $575-$625k. I have long dreamed of getting into the flipping business, and this seems like a great opportunity.
My hope was actually to do the work w my stepbrother (my mom’s husband’s son who is a trustworthy, skilled, licensed contractor). In a perfect world, I was thinking they would hold off on the sale, let us do the work, I would pay for supplies and labor, and they would give us whatever they get over $350k. My thinking was that this would not incur the fees and taxes that would usually come into play. In particular, bc this is an inherited property, the increase in value would not be taxed.
I have already hit one snag. The sister wants her cash very quickly.
I have strong credit but no income. My wife has great income and decent credit. I was thinking of perhaps hard money lenders for the sister’s cut, and then to pay for the rehab. I figure that is still a small amount relative to the tax savings and fees, etc…
I’d love to hear any and all suggestions!!
Thanks so much.
Thanks for the question. One of the challenges you need to hash out right away is “the sister’s cut.” Does she want her cut of after repair value or current value? In either case, you’d need an appraisal to get to the actual values. The appraisal will be part of your loan approval process, but you will need to get some information and help beforehand.
The second piece is, you really should talk with an attorney and an accountant about this because there are many moving parts and you want to make sure it is structured in a way that maximizes the potential. Hard money loans come with higher rates and fees, so you’ll also want to do a cash flow forecast to make sure this will end up being a profitable venture.
Here is the link to all of our fix-and-flip articles that can help you as you develop your strategy.