How to Get the Most Out of Your House Flip
At PropertyLark, we have a lot of investors in our home buying network who are exclusively fix and flip buyers. We get it. Quick flips are great when you know what you are doing. You don’t have to hold the property very long and you can make a nice profit if you do things right.
Doing things right is the important part of the plan, and having a solid plan is the first step do doing things right. There are many mistakes that inexperienced house flippers will make. They make it look so easy on all those shows on TLC, but those of us that have been doing it awhile know it’s never quite that simple. As we all know, there is a lot that goes into a successful flip.
Identifying Good Investment Properties
Perhaps the most important part of fixing and flipping is to find the right house. You have to identify properties that are worthwhile to purchase and that will have good resale potential. You have to look at the floor plans, square footage, neighborhood, comparable home prices and a lot of other factors. You have to run the numbers of what it will cost to make the necessary repairs and upgrades, how long it will take to complete the renovations and what the house could ultimately sell for when ready. It is a good idea to be conservative with the resale price while also adding a “cushion” on top of your projected renovation costs. It’s better to be safe than sorry because there are almost always some surprises along the way.
At PropertyLark, we use advanced custom analytics software and techniques to identify good investment properties that we can pass onto our buyer network.
Getting the Best Purchase Price
Now that you have identified a property that is worth buying, you will want to get it for the best possible price. You’ll want to put together a strong purchase offer that helps you stand out from any fellow buyers. This includes having a solid financing system in place, whether you are paying straight cash, getting a loan or using a line of credit. The goal is to leverage your buying power into the lowest possible purchase price, which leaves you more meat on the bone when you are reselling it.
Having a Smart Renovation Plan
The biggest mistake many first-time flippers make is that they spend more than they need to on repairs and upgrades. They buy all the best building materials and install top-of-the-line appliances thinking that this will make the house worth more in resale. That may be true, but the numbers don’t always add up in your favor. A $3,000 air conditioning system may only add a few hundred dollars on the actual resale value. You have to be smart with the money you are spending and figure out how much actual real value each repair and upgrade will bring upon resale. Check out our recent article: “House Flipping 101: Save Money without Sacrificing Quality.”
Setting a Resale Price
You will likely already have a final resale price in mind before you even buy the property. You have run the numbers and know what you need to get out of it for it to be a worthwhile real estate investment. As with any home sale, it’s important to set a proper asking price that will attract qualified buyers without pricing you out of the market. You don’t want it set too high or too low, and you will want to go in with a bottom dollar set that you are willing to accept if you aren’t able to get full asking price. In other words, set an acceptable price range and then use that to set your listing price.
Home Selling Plan
The asking price and acceptable price range are both parts of an overall home selling plan that you will want to have in place. Beyond just the renovation costs, you will have to factor in ownership expenses for the time you expect to own the property until it sells. This may include property taxes, HOA dues, insurance and loan payments if you are financing the deal. Before you buy any investment property, you should have a plan that maps everything out from purchase through the final sale. This helps avoid major surprises—though you always have to be ready for some surprises during the renovation process—and will help keep you on track with your expenses and overall timeline. Without a solid plan, you are just flying by the seat of your pants and that’s how many investors end up losing money on bad flips.
If you are a real estate investor looking to get the most out of your fix and flip properties, join the PropertyLark home buying network. It doesn’t cost you anything to be a member. If you qualify, you’ll have access to our exclusive off-market deals that have already been analyzed and identified as great investment properties. To apply for our network, visit our home buying page and fill out the contact form and questionnaire.