Real estate is a solid investment. As the market continues to rise, it’s easy to see why more and more people are getting in and seeing increasing returns. All it takes is a smart strategy and some seed money to start your flipping career. But be aware, there are dangers and pitfalls to avoid when considering fixer upper properties. This guide is designed to help new investors learn the best practices in flipping homes for profit and have a little fun too.
1.Learn From the Best– Get an education on residential real estate and flipping homes from folks who’ve done it. Experts on the topic can give you a clear picture on what works and what doesn’t. Take the time to invest in really learning about the topic before you begin; read books, find a mentor and hone your strategy.
2. Research Real Estate in Your Area– Read up on housing trends and look at listings and foreclosures. Drive around neighborhoods and see potential fix and flip homes for yourself. Investigate areas that may be up and coming or experiencing shifts in demographics or where other real estate investments are happening. Stay current on what’s going on and what’s for sale so you can get in first.
3. Do the Math– Accurately calculating the costs of repairs is essential when considering a property’s flip value. Do a thorough inspection and be realistic when estimating the rehab budget. Are you going to make the repairs yourself or hire contractors? Make sure that if unexpected repairs arise, you’ve got the time and money to complete the job. A good rule of thumb is to pad your rehab budget by 20%. Remember this equation:
Your Profit = Selling Price After Repairs – (Your Purchase Price + Repairs)
The most important variable is the cost of the repairs.
4. Make An Offer– When you’ve found the right house and have your repair estimates dialed in, it’s time to make an offer. Make sure you know the highest price you’re able to pay and where you’ll get financing, whether it’s a bank or hard money loan, before you start negotiations. If the house is a great deal, there may be other investors that are interested. In some neighborhoods with high demand fixer-upper homes, savvy investors go door to door with offers.
5. Fix It Up– Get to work on the repairs. Whether you’re doing it yourself or using contractors, make sure you’ve got the correct permits, a realistic timeline and budget to keep everything on track.
6. Sell Away– Once you’ve fixed it, it’s time to flip it. Using the MLS listing service and a real estate agent can help you find a buyer fast. Working with a realtor has definite advantages since they often have lots of knowledge on local real estate markets and trends, as well as, can help by showing the house and closing the deal.
7. Repeat- The best investors reinvest in new projects to increase returns and build wealth.
Flipping houses has both risks and rewards. Taking the time to research and refine your fix and flip strategy and being aware of potential challenges can mean the difference of thousands or even tens of thousands of dollars in your pocket. If you’re ready to make the plunge into the lucrative fixer-upper market, Advanced Funding Solutions can help.