Fix and Flip Tips for First Time Investors
If you want to get involved in flipping houses, the first thing you should know is that it’s not as easy as they make it look on TV. From finding a location to understanding your funding options, there is a lot of research that must take place. While there are a number of challenges you may run into, understanding the process from start to finish will help you prepare for these hurdles.
Along with knowledge, having a trusted team including a realtor, loan officer, general contractor and a few others will help ensure your investment is profitable. With that said, here’s the process you should follow to maximize your fix and flip property:
Finding the Right Location
The neighborhood of the fix and flip property you decide to invest in will go a long way in determining your profitability. Identifying the right neighborhood comes down to a few factors.
First is identifying the average selling price range for properties in the area. In addition, the number of days on market for recently sold homes in the area is also important. This will give you a good measuring point when trying to determine how much money should be put into the rehab of the property.
You’ll also want to be wary of market trends. Whether that’s homeowners moving in or out of the area, or employers moving in or out of the area. These trends will let you know whether there will be demand for your home after renovation.
Lastly, there are numerous demographic factors that you’ll want to consider. Everything from commute times to quality of schools to crime rates will play a factor in the value of your home. Digging into all of this information can get granular which is why having a trusted realtor is important. They will help you identify which factors you should be keenly aware of.
Defining Your Fix and Flip Budget
Once you’ve narrowed your list down to a few target properties, you’ll start to have a clearer picture of costs. As you’re defining your budget, there are various costs for you to consider.
The most obvious cost is your renovation. While you could always do the work yourself, you’re likely better off hiring a general contractor. These will be the largest expenses in your rehab budget. Understanding which utilities and finishes are the most important will ensure that your rehab dollars are maximized.
Then, you have to consider the miscellaneous costs that are often overlooked. Assuming you’re using a realtor, you’ll have to pay any of their associated fees. While holding the property, you’ll have insurance, tax, and maintenance costs.
By taking all of these costs into consideration, you’ll be able to determine how much you can invest into the property while still making your desired profit.
Closing the Deal
After you’ve identified your property and determined your costs, it’s time to put the home on the market. Before listing the home, you must determine if you’re going to rent or sell the property. Even if you determine that you’re going to sell the property, you can always convert it to a rental property if the selling price isn’t what you projected.
In this stage, the realtor on your team will play a large role. A quality, local realtor will be able to stage the home and put it on display for qualified buyers. They’ll also have strong knowledge of the area and be able to present a strong proposition to buyers.
Investing in fix and flip properties takes knowledge and patience. It’s a time tested method of real estate investing. Start with understanding the process, then reach out to real estate and loan experts who can put you on the right track.