Flipping homes can be both rewarding and astoundingly lucrative, but it’s also a competitive business. When you’re selecting your assets or working on upgrading and improving property for resale, your strategy is going to matter a lot. Remember you’re not the only one out there shopping around for fixer-uppers to make a quick buck.
We offer the hard money solutions that help our fix and flippers to secure the capital they need for the short term, to get these properties fixed up and re-sold. Here’s some of what we have to offer in terms of guiding your fix and flip strategy.
As with any kind of investment, like Warren Buffett used to say, you don’t want all of your eggs in one basket. With that in mind, you don’t want to max out on your first or second property, paying in almost all of your available capital, and then praying that everything goes well. Give yourself not a little, bit but a lot of wiggle room. Move in increments, so that you can build your nest egg and plow your profits from your first and second project into a third and fourth one. Spreading yourself too thin is a familiar rookie mistake that can be avoided with good planning.
Look at Space Requirements (and other caveats) for Add-Ons
In a similar vein, we recommend not getting too greedy when it comes to one of the biggest fix and flip procedures that can be difficult to pull off.
Yes, adding a bathroom or bedroom is going to make a huge difference in some types of CMA reports that agents give to their customers. But in reality, agents are getting a little bit savvy to fix and flippers trying to game the system with these numbers, and the closet bathroom isn’t going to go as far in competitive CMAs as it used to. It’s kind of like Google with its ranking algorithms – agents are looking more at the context of a higher bedroom or bathroom count prior to showing. That’s not to say that adding one of these isn’t a good strategy – just that you should make sure you’re not trying to Frankenstein a house just to get an extra $30,000 or $40,000.
Start with Systems
We’ve also seen some investors do some pretty top-heavy flipping where they added square footage for bedroom/bathroom count without addressing aging HVAC, plumbing and electrical systems.
What you end up with is kind of an empty shell that might attract buyers on paper, but will not entice any savvy buyer who knows what they’re getting into in maintaining a property and actually living in it. With that in mind, if you have a good trades person for HVAC and plumbing, or you know enough about these yourself to upgrade systems, that’s worth its weight in gold for your investment strategy and getting these properties not just back on the market, but re-sold!
Talk to Locklin Capital about what you’re doing. We can help!