How Brokers Can Help Investors Maximize Fix and Flip Returns

In today’s highly competitive real estate environment, fix and flip investors are finding creative ways to bring older or neglected properties to market, and making substantial returns in the process. Brokers and lenders play a key role here, not only by providing investors with the right loan programs, but also by advising on strategy and helping clients find good properties to invest in. Additionally, many first-time home flippers need the guidance of an industry expert to help ensure their projects are successful. At the same time, lending partners can benefit from a new source of customers who provide plenty of opportunities for repeat business.

Are you a broker or lender that offers fix and flip financing, or one that is considering branching out into the asset class? Here’s how you can effectively help your clients win with home flipping, while establishing lasting relationships that help you grow your loan pipeline.

Recommend the Right Financing Structure

Although it isn’t everything you do, your main goal as a broker is to match clients with the best financing option for their specific scenario. In order to do so, you’ll need to take time to learn what exactly your client’s project entails, and also educate them on loan specifics and how they might impact ROI. For example, a lower interest rate might save them money over the course of the few months they are borrowing, but it might be more beneficial to go with a private loan that can be approved faster and deliver funds sooner. Be sure to discuss all available options with your clients, including interest-only loans which help free up liquidity, enabling borrowers to focus on completing their projects.

Help Investors Calculate ARV and Budget Accurately

Of course, accurately estimating returns is also key to a successful flip. Many investors tend to overestimate ARV while also underestimating repair costs, leading to much lower margins than expected. Brokers can provide value beyond the loan by helping clients make better decisions before they make any purchases. Your expertise can be beneficial for finding comparable properties to get a better idea of ARV, and for connecting clients with trusted professionals to obtain accurate repair estimates. You can also recommend tools or calculators that enable more effective planning and simplify the budgeting process.

Speed Matters, and Brokers Can Accelerate Closing Times

One of the most important aspects of a profitable fix and flip is speed. Delays in funding or a project’s timeline can incur higher holding costs and eat into an investment’s return. That’s why it is crucial you develop a system that can deliver quick financing to your clients for these projects. Be sure that you’re working with lenders who understand the importance of speed, and have experience in the fix and flip space which helps provide you with a streamlined financing process.

Bonus Tip: Pre-qualify investors and make use of online document collection to speed up the financing process even further.

Educate Investors on Market Trends and Risk Management

Brokers provide services to their clients well beyond just offering financing. You also serve as an investment advisor, helping strategically guide clients to better investment decisions. Providing borrowers with insights on local housing trends, pricing, and areas with high demand helps establish you as an industry expert, allowing you to build stronger business relationships. You can also refer clients to data aggregation platforms like ATTOM data or REI DealMaster that help them conduct due diligence and avoid bad investments.

Speaking of risk management, you should warn clients about some of the more common risks that can derail a fix and flip investment. One of the most common is over-improving a property for the area it’s located in, which typically leads to fewer offers and a lower final sale price. Another common risk is market shifts, which can be avoided by taking time to conduct proper due diligence. Be sure to stress the importance of these risks when working with clients, especially if they are first-time home flippers.

Build a Network of Value-Added Services

One of the benefits of working in the fix and flip space is establishing relationships with other professionals in it. Having a network of trusted contractors, real estate agents, and tax experts you can recommend to clients helps lead to smoother projects and improved returns. It also positions you as a one-stop resource for investors, making them more likely to return to you for future endeavors. Additionally, many of these professionals are involved in real estate investing themselves, and can become a new source of business for your brokerage.

Bonus Tip: Becoming a certified real estate agent or tax professional means you can offer even more services to clients, furthering your position as a one-stop shop for home flippers.

RCN Capital

To help your clients maximize the returns on their next investment, partner with a lender that can provide you with the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors and lending partners. If you are looking to offer fix and flip financing to your clients, RCN Capital has competitive loan options and an award-winning broker referral program available to partners.