You have likely heard of fix-and-flip real estate investment and are aware that it can be both a reward and a risk. Unfortunately, it is not as simple as just buying a property at a low price, renovating it, and then selling it in just 90 days. You need some information to ensure your flipping efforts are successful and profitable. Keep reading for some tips to get started with.
NEVER PURCHASE A HOME WITH MECHANICAL ISSUES
If you want to purchase a house to flip, you should try to find one that requires mainly cosmetic improvements. If you find a home that requires a new roof or that has an outdated electrical system, you will wind up putting too much money into the property to make a good profit. Also, avoid any home that has foundation problems unless it is something you can fix on your own. Choose properties with minimal cost improvements. This is what will lead to the most profit for your investment.
AVOID MAKING UNNECESSARY IMPROVEMENTS
Make sure that you only fix necessary things. If you over-improve your property, it will not provide you a good ROI. Remember, flipping houses is a business, and you don’t want to make renovations that create a dream home – this is not the goal.
FIGURE OUT HOW MUCH CASH YOU NEED
If you are new to flipping houses, you may look into hard money lenders, which is a viable way to get a large amount of cash you need for this venture. Usually, with these loans, you will receive 20% up to 40% of the sale or the down payment. However, you may not realize that it is possible to reduce this percentage if you work out a deal with the lender where they receive a percentage of the profits you make. If you have had success with flipped houses in the past, then it is more likely that a hard money lender will provide you with this type of deal.
PLAN THE RENOVATION CAREFULLY
During any fix and flip process, planning is essential. Part of the planning process should include interviewing the contractors and subcontractors, and if needed, speaking to architects and engineers. Be sure that you secure your funding source as early as possible, too. You need to find out the timeline, process, and all related costs to get the needed permits for flipping the house. Once you have this information, you can create a general budget and timeline.
As you can see, there is a lot that goes into fixing and flipping a house. However, when you do it right, this can be an extremely profitable venture. Be sure to take your time, find the right property, and secure your financing. These first steps will help set your venture up for success and help ensure your investment provides a high ROI, which is, after all, the entire goal of fixing and flipping houses in any area.