Fix and flipping properties can be a great side hustle or full time job for any real estate investor.
Due to a strong US real estate market and numerous well liked fix and flip TV shows, flipping has been a popular and winning strategy over the past decade.
For flippers to be successful they must purchase an undervalued home with lots of after repair value potential that is located in a desirable area.
There is an old saying in real estate, the money is made on the purchase, not on the sale.
Consider the following factors below when deciding on your fix and flip project.
Major pitfalls can be around the corner in any property.
Have a contractor inspect the property prior to purchasing to ensure the property is in fair condition and does not require any major structural changes.
Structural issues can be costly and time consuming.
Also, avoid homes with small kitchens, bad bedroom to bathroom ratios and poor layouts.
Try to select a home with a great open floor plan, large bedrooms and full bathrooms that will be easy to remodel and will appeal to a large pool of future potential buyers.
Location, Location, Location!
A property in a great location will be easier to sell once the renovation process is complete.
Any of the following features will be attractive to home buyers:
- Low crime rate
- Great public school system
- Close proximity to public transport
However, watch out for anything listed below, as these features will decrease a property’s value:
- Close to airport
- Close to freeway
- Busy traffic area
Select Renovations that Sell
Before purchasing your diamond in the rough property, flippers should have a clear vision of what value-add renovations will be made.
Fix and flippers need to understand they are renovating a home for an end buyer and not for themselves.
Avoid making this the house you have always dreamed of and instead focus on renovations that will appeal to the masses.
Don’t waste money on frivolous and costly renovations such as pools and high end appliances, traditionally these do not provide the best bang for your buck.
Instead, allocate your funds to high return on investment renovations or additions such as bedrooms, bathrooms and kitchens.
Knowledge of Local Property Values
Knowledge is power.
Become an expert on property prices in your desired area to give you the edge over other real estate investors.
To determine property values, consider the following:
- Average price per square foot
- Recent comparable sales
- Number of days on the market
Good deals do not last long.
It is very important for real estate investors to have a source of funding lined up to capitalize on an undervalued or mispriced home.
Fix and flippers commonly use hard money lenders to fund their projects because this type of funding is considered by many to be as good as an all cash offer.
Since flippers only need capital for a short period of time, this is often a fantastic funding option for investors.