Fix & Flips Bad Choice Right Now - Mortgage Applications Plummet

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Fix & Flips are always risky although they can be quite profitable if done properly in a high growth rate place like California. The average Fix & Flip runs 6 months from the time you buy the property, to fixing it up, to marketing it, to closing, to getting a check so that you can do the next one. Keep in mind that most Fix & Flips are short term capital gains so taxes are high on them. When the market is "right" it can be a wonderful thing. As the market changes it can bring disaster and you can become an unplanned landlord. 

Most rehabs are sold using FHA, VA, or Conventional loans. In order to get those loans someone has to make application and then actually *qualify* for the amount you are selling for. Applications are a leading indicator of the market. Applications are way, way down. Will you even have a buyer when your Fix & Flip hits the market? Right now is a time of transition: Click on Image to Enlarge

Mortgage Applications Plummet To 18-Year Lows As Rates Hit 2010 Highs

Perhaps a better solution is to utilize Seller Financing of some sort. You have to plan it into your exit strategy at the beginning to make the most of it. Changing to that technique as an after thought is not optimal. This technique enjoys cash flow, favorable tax rates and additional tax write offs as well as principal pay down. You get the best of all worlds. As an example of how this is done see: 

Average Cash Flow Per Door In Phoenix Metro Area

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