6 Reasons to Finance a House Flip in Winter

Posted by Residential Capital Partners on Feb 3, 2020 5:13:43 PM

Conventional wisdom says that late spring and early summer is the best time to sell a home or an investment property, but real estate investors and hard money lenders alike know that winter poses its own special opportunities, and that the colder months can be an ideal time to make your move.

Aside from the fact that hard money loans or property investment loans are also available in winter, there are other reasons why the winter months could be prime time to finance a house flip.

1. Less Competition From Home Buyers

For most people, winter is a time for family and holidays. Their cash is likely to go to presents and travel. Any major moves, such as the purchase of a new home, are often put on hold.

Because of this, you can approach sellers in the winter months knowing that the market is slower than usual. In the US, the annualized price of the average home can fluctuate 5-7%, depending on the time of year. In active markets like Dallas, the fluctuations have been recorded as high as 12%. And, almost without exception, the point at which prices hit their lowest level occurs during winter months.

2. The Timing From “Fix to Flip” Is Perfect.

Statistically, the best time to sell a house is in May. Houses sold during the first half of May typically sell 18.5 days faster than other months and go for 5.9% more money. On a $200,000 house, that could be a cool $11,200 bump in profits.

If you purchase a property in December, you can shoot for a completion date of May to bring your renovated property to market. It’s as simple as that: Buy during the slow season, and sell during the peak season. That’s a simple yet very effective way to maximize your profits.

3. Less Competition From Other Flippers — Including Newbies

It’s a fact that people don’t like to work as much during the holiday. Or, rather, they’re more apt to spend their time working on the assorted chores and errands involved with holiday parties, travel and celebration.

Many seasoned investors take a break during the holidays and ramp up in the new year.

More importantly, novice flippers are much more likely to be short on time and cash. The “newbie” flippers are one of the greatest challenges that seasoned flippers face. Fueled by the countless TV shows that create the notion that flipping is easy and can be wrapped up in a 60-minute show, novices often bid up the price of a property. In winter, you may find yourself bidding against fewer of them.

4. Great Opportunities Can Open Up Any Time of Year. 

Inherited houses. Repossessions. Job relocations. Divorces. Couples merging households. Retirees downsizing or moving to assisted living communities.

Events like these aren’t limited to a particular season. When they occur in the winter months, they are likely to be met with a smaller pool of buyers — which can result in a better deal for you if you are ready to respond with approved financing.

As an added bonus: Sellers who’ve had their house on the market for an extended period may be open to negotiating at year end, simply so they can go into the new year with one less piece of unfinished business.

5. Potential Lower Labor and Material Costs 

In most markets, winter is a slower time of the year for building. That means independents who handle demo, cleanup, landscaping and other tasks might be found at more competitive prices. January and February are also the time to find post-holiday markdowns on appliances, fixtures and materials, as well as bargains on gently-used items after people have made their Christmas upgrades.

6. Minimize Your Taxes by Re-Investing

Depending on how you’ve structured your business, putting some of your profits back into a new property before December 31st can help you minimize your taxes for that year. If you’ve had a really great year and are looking at a hefty tax bill, a year-end purchase can help you defer those taxes.

 

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Topics: Fix and Flip Financing Tips