How to Use a Loan for Your House-Flipping Business | Fora Financial Blog
6 Tips for Using a Loan for Your House-Flipping Business
October 31, 2018

6 Tips for Using a Loan for Your House-Flipping Business

Flipping homes as part of a real estate investment business can allow you to make a lot of money in short amount of time if you know the tricks of the trade. If you don’t invest in the right areas, flipping houses can become an expensive venture that isn’t worth your time or resources. That’s where a business loan comes into play! In this post, we’ll provide six examples of ways that you can use a business loan to grow your house-flipping business into a lucrative company!

How to Use Your House Flipping Loan

1. Purchase Property

To remain operational, you’ll need to be on the lookout for your next property. After determining how much you want to spend (we suggest using the 70 percent rule), you can find houses within your budget. When you find the perfect place in the right neighborhood, you want to be ready to buy it. With a business loan, you’ll have the funds available and won’t have to risk losing the property to another buyer or paying for it out of pocket.

2. Invest in Supplies

The price you pay for supplies, tools, and equipment will depend on what you already have available and how much work needs to be done on the property before it can be resold. Unfortunately, if you need a lot of supplies, the costs will quickly add up.

Once you receive a business loan, you can buy or rent equipment, or purchase basic supplies like lumber and nails. Later, when you’re designing the space, the money can be used for everything from new cabinets to renting furniture to stage the home. Having a loan gives you financial freedom, and you won’t need to worry about being unable to afford the necessary supplies!

3. Hire Workers

As you likely know, house flipping projects are easier when they are extra hands to help. Due to this, you should consider using your loan to hire additional employees.

If you decide to spend your loan on hiring, be sure you’re considering all of the costs that come along with that. For example, aside from the employee’s wages, you’ll need to consider the costs of background checks, additional tools or supplies, benefits, training courses, and other typical costs.

4. Pay for Contracted Work

There are some jobs that might not require you to hire a permanent, full-time employee, but could be something that you can’t tackle on your own. Using your loan, you can hire contractors for these types of projects. For example, if you need to replace a roof, you could pay for a professional roofing company to handle this job. You could also hire contract employees to handle other jobs that you might not having time for, such as painting rooms once the project is nearing completion.

5. Afford Insurance and Fees

Taxes, insurance, and legal costs are often not the first thing people think of when they consider flipping houses for a profit. However, these costs are necessary and must be part of your budget. For instance, you’ll need to pay for work permits and property insurance, which can vary based on the area the home you’re working on is located in. Also, you’ll need to pay to turn on the utilities, so your workers have access to water and electricity to do their jobs.

6. Sell the House!

When the job is completed, and you can admire your hard work, there’s still one thing left to do; you need to sell the house. This can be exciting because you’ll hopefully be earning money that will help you take on more projects, but you should remember that you’ll need to spend a little to make a lot.

Open houses and ads in the newspaper are inexpensive but might not attract enough potential buyers. Instead, you might benefit from using your loan money to hire a realtor, which will give you the best chance of selling quickly. The expense will be well worth it when you make the sale!

There are a lot of unexpected costs that come with running a house flipping business. Using a loan to cover those expenses can help complete your project and allow you to get moving on your next home!

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Post by:
Fora Financial is a working capital provider to small business owners nationwide. In addition, the Fora Financial team provides educational information to the small business community through their blog, which covers topics such as business financing, marketing, technology, and much more. If you’d like to see a topic covered on the Fora Financial blog, or want to submit a guest post, please email us at [email protected].