I get a lot of people asking me about options and how you can use them for flipping houses
In my opinion, options are better for development because it gives you time to go and get approvals with council and stuff like that. It enables you to get these approvals while you don’t own the property and therefore you don’t have any purchase & holding costs.
However, when you’re flipping and you’re needing to renovate the property there is a better way…
A seller joint venture deal (also known as a takeover deal) is a deal where you have an agreement with the homeowner that you’re going to come in and you’re going to renovate the property while they still own it. In fact, you will never own the property meaning no purchase costs or holding costs.
You will have an agreement drawn up and the correct security put in place by a solicitor.
Typically, you will agree on a price that the seller will receive and they will receive this once the house is sold after renovating. You will fund the renovation and receive whatever it sells for over & above what you’ve agreed the seller will receive. You can also sweeten the deal
by giving the seller more if the property sells over & above a certain figure.
Once the agreement is in place, the homeowner moves out and you come in and renovate. The house is sold on completion of renovation and both parties are paid which is hopefully a win/ win for both parties.
Because you never actually buy the property you are saving onPurchase costs (including deposit, stamp duty & settlement costs)Holding costs (mortgage repayments, utilities, insurance etc)I should mention however, these deals can be structured any way you like, therefore if you had a homeowner that needed help financially, you could take over the existing holding costs, this would be factored into your feasibility and therefore factored into how much the homeowner will receive from the sale.
