Can You Sell a Partially Renovated Flip?
Flipping houses can be a profitable venture, but sometimes, things don’t always go to plan. Whether you run into issues with your budget, time constraints, or shifting market conditions, you may find yourself thinking it’s best to sell a partially renovated flip. While this isn’t necessarily the ideal scenario, it can make the most sense in some situations. Today, we’ll discuss when you might decide to sell a partially renovated flip.
Contents of This Article:
- What Is a Partially Renovated Flip?
- Why Would You Sell Before Finishing a Flip?
- Pros and Cons of Selling a Partially Renovated Flip
- Find the Right Lender for Your Project
What Is a Partially Renovated Flip?
A partially renovated flip is essentially just what it sounds like. Say you buy an investment property with the intention of fully renovating it, but life gets in the way, and the process is never fully completed.
This could mean anything from cosmetic updates being halfway done to major structural or system work still needing attention.
Seasoned fix-and-flip investors know that these projects can be costly and time-consuming. That’s why many turn to Baltimore hard money loans to fund their renovations quickly and flexibly. However, if you’re a newer investor and you’re not prepared for the scope of work, you may find that selling the property early is the best option. That said, there are several reasons you may want to sell a partially renovated flip, which we’ll review in the next section.
Why Would You Sell Before Finishing a Flip?
There are several reasons why you may choose to sell a flip before completing renovations. While the goal is generally to maximize profits with a finished reno, sometimes selling early is the smarter, or more necessary, move. Here are some of the most common reasons an investor may choose to sell a partially renovated flip.
- Ran Out of Money
- Ran Out of Time
- Shifts in Market Conditions
- Better Opportunities
- Too Overwhelming
Ran Out of Money
It doesn’t take much for renovations to go over budget. Several things can get in the way, whether it’s unexpected issues, rising material costs, or contractor delays. If you find yourself running low on funds and unable to secure more, selling mid-project can help you cut your losses. After all, it can be better to walk away with something than go deeper into debt.
Ran Out of Time
Running out of time is another reason some investors decide to sell before completing renovations. Maybe your holding costs are piling up, or you’ve taken on too many projects at once. When your time starts running thin, letting go of an unfinished flip can help you focus on other projects that may take priority. The longer a property sits untouched, the more it eats into potential profits.
Shifts in Market Conditions
Investors know that real estate market conditions can change quickly. It’s important to monitor things like interest rates, buyer demand, and comps in the area. That said, if the numbers no longer make sense for a profitable flip, selling early may be the best option. Moving quickly to make this decision can help you avoid a bigger loss later on.
Better Opportunities
Sometimes, a better opportunity comes up, and you need some cash to fund it. If your partially renovated flip is sitting stagnant, selling it can help you free up capital and move on to something else.
Too Overwhelming
Flipping a property isn’t always as easy as it looks, especially what’s portrayed on TV. For instance, you may run into structural issues, permit problems, or just feel as though the project is out of your depth. That said, if a project becomes more trouble than it’s worth, selling the property can make you (and your wallet) feel more at ease.
Pros and Cons of Selling a Partially Renovated Flip
While it may not be your ideal plan to sell a partially renovated flip, there are some benefits and disadvantages to consider. Remember, it’s not always a bad thing, especially if you’re protecting your bottom line. Here are a few main pros and cons to consider.
Benefits of Selling an Unfinished Flip
- Free Up Time and Money- By selling the property early, you can stop putting your money into a project that doesn’t make financial sense. That way, you can allocate your funds toward a more profitable opportunity.
- Avoid Further Risk- Renovations can come with surprises, like structural issues, permit delays, or material shortages. That said, sometimes it’s less risky to sell a property before these issues get worse.
- Leverage a Strong Market- If the local market is strong, you may be able to sell the property quickly, even if renovations aren’t done. If there’s high demand, you may be able to walk away with a decent return.
- Appeal to Other Investors- Not every buyer is looking for a turnkey home. Some investors may seek out partially completed flips that they can complete on their own budget.
Disadvantages of Selling an Unfinished Flip
- Reduced Profit Potential- Unfinished homes usually sell for less, as buyers will factor in the cost of completing the renovations. This could eat into your expected profit margin for the property.
- Smaller Buyer Pool- Traditional buyers, or those looking for move-in-ready homes, will likely shy away from an unfinished flip. With that, most lenders won’t finance incomplete properties. So, you may be limited to investors or cash buyers.
- Required Disclosures- You need to be transparent about what’s been done with the home, what still needs work, and any issues with the property. If you don’t disclose major issues, it could lead to legal trouble or renegotiations.
- Perceived Risk- If you’re a real estate investor, selling an unfinished project might raise questions or concerns among lenders or partners. It may also impact your reputation in local real estate circles.
Find the Right Lender for Your Project
Most investors don’t start a fix-and-flip project with the intention of selling it before it’s finished. However, selling a partially renovated flip can be a smart way to protect your investment, especially if you’ve run into unexpected issues or found better opportunities. That said, the key to a successful flip, whether it’s finished or not, starts with the right financing.
If you’re looking for a fix-and-flip loan in Maryland, working with MHML can help you get funded quickly and efficiently. Maryland Hard Money Lenders has an excellent team of experienced professionals to help you get the funding you need. Learn more about our lending process, or fill out our initial loan application today!
