Do Hard Money Reviews How to Structure a Purchase Contract for your Next Fix & Flip
Once you find a property to flip, you might think the road is easy going from here. But not so fast—you’ve got a long path ahead, and the first challenge is structuring your purchase contract. When the contract isn’t done right, your deal could face serious problems—anything from a delay to completely falling through.
Don’t let your hard work tracking down a great investment go to waste. Do Hard Money reviews the basics of purchase contracts to make sure you don’t miss anything important.
Flexibility in the purchase name can make things easier for you in the long run. To secure funding for your flip, don’t buy the property under your own name—use the name of your company instead. When Do Hard Money reviews contracts, they and other lenders will offer financing only to business entities, not to individuals. This protects both parties from liabilities and avoids some residential regulations. To qualify yourself for funding, and to set yourself up on the path to renovating and flipping, include the purchase name in one of these three ways:
- Purchase in the name of your company
- Add an addendum to the purchase contract stating that the buyer has the right to create a new entity for the property
- In the purchase name, add your name or the name of your company, followed by “and or assigns.”
Any of these options will allow you to assign the property to your current or future business entity for the purpose of renovating and reselling for a profit. Simply signing your own name, without giving yourself the right to later reassign it, puts your deal at risk.
Some people will tell you to state in the purchase contract that you are paying in cash, even if you aren’t. There’s no need for this—be up front and state that you are using hard money or private financing.
Another problem newbies struggle with is setting and following deadlines in creating their purchase contracts. Do Hard Money recommends house flippers use these deadlines as a guideline:
- Appraisal: 5 to 10 business days from acceptance
- Inspection: 10 to 15 business days from acceptance
- Loan denial: 10 to 20 business days from acceptance
- Purchase: 10 to 20 business days from acceptance
Even as you’re negotiating a contract on one property, keep looking for more properties and making offers as they come along. Don’t put all your eggs in one basket, and always be open to a new investment.