Flipping real estate isn’t as easy as it looks on television. Although it can be a great way to make a profit if you invest in the right property at the right time, it’s also very easy to find yourself running over budget and struggling to pay the mortgage on a property that you haven’t finished working on yet!
If you’ve found yourself in this situation don’t panic! There are a few steps you can take to salvage your project and still make a profit.
There are companies who specialize in foreclosure loans, allowing you to make your mortgage payments, finish your real estate project, and still make a profit. Obviously, the loan company will charge you interest, but this could be a better option than crowdfunding or sweat equity, as it will ultimately mean that you don’t need to divide up your profit as much once the project is complete.
If your problem is that you need to get work on your property finished before you can sell it at a profit, but you don’t have any capital left to pay your workers, then you could consider sweat equity.
Essentially, this means that you enlist the workers you need to finish the job and rather than paying them upfront in cash, you would reward them for their hard work with a cut of the profits when the job is completed and the property is sold.
In order to make this offer attractive you would probably need to offer a higher payout than their usual day rate, but it can be a good way of getting yourself out of a hole. If you decide to go down this route be sure to write up a contract that you all sign, in order to save on any disagreements down the line.
Crowdfunding for real estate is becoming popular amongst people who want to invest in real estate because of the high return rates and relatively stable market, but don’t have the capital to finance an entire project themselves.
As with sweat equity you would need to be offering your investors a higher profit than they would make elsewhere, otherwise your offer will not be attractive to them, but if you can make the right offer then it should be possible to raise the capital you need and still return a profit.
Remember that when people are investing in a crowdfunding project they are investing as much in you as a person as they are in the project, so provide enough information to make a personal connection with your audience. Video is a great tool for this; tell your story and what you’re hoping to achieve, and why your potential investors should trust you.
Be sure to weigh up all of the available options when you are deciding on how to proceed, and make your decision based on what makes the best financial sense for your project. Try not to let panic sway you!