I get loads of people asking me about using options for renovating and flipping.
Options are great for development because they enable the developer to submit for approvals without having to ‘hold’ the property which saves hosting costs. They can then use their option agreement to buy the property or potentially on sell it with a DA in place.
but for flipping houses there’s a better way…
A seller joint venture is where you don’t actually buy the property. You never own it, therefore there’s no purchase costs and potentially no holding costs.
Instead, what you’re doing is you’re striking a deal with a homeowner. The house is probably going to be a renovator. So, you’re going to come in and you’re going to renovate the house and then take it to market.
Why would a seller agree to this?
Well maybe their home needs to much work and they cannot sell it & they don’t have the funds or know how to renovate it themselves.
Maybe, you can give them more $$ than what they would get by going to market unrenovated.
You’re creating a win/ win for you and the homeowner.
In a typical deal, you would cover the renovation costs and have an agreement in place where the homeowner gets an amount and your profit is what’s left over. Maybe a profit share as well.
For example, I did a Seller JV deal in a suburb in Perth called Willagee.
The owner and I agreed she would receive $650,000 after I renovate and sell it.
I spent $60k on the renovation and we sold it for $850k.
We agreed if it went over $820k, we would profit share the difference.
I walked away from the deal with my $60k back that I put into the renovation and a profit on top of $95k.
These deals are done above board with an agreement drawn up by a solicitor and security in place for you so everything is above board.
