How Much to Fix Before You Flip
There are essentially three types of house flippers:
- Immediate Resale—No repairs, quick flip with minimal profit.
- Fast Fixes—Only necessary repairs, relatively fast resale with medium profit.
- Full Renovation—Major renovation, maximum resale price and profit.
Which is the Best House Flipping Approach?
There is not necessarily a wrong answer as to which type of real estate investor you are. Fix and flip investing can be fruitful with any of these strategies. The first one is basically a wholesaler who would need to complete many quick flips to generate a strong profit. They are simply buying up properties as cheap as possible and then turning them over to another investor to complete the renovations.
The fast fix method requires some commitment of time and money, but the house flipper is primarily focused on taking care of the basic renovations and updates. They may buy a run-down property and fix it up just enough to earn a decent profit on the resale. Again, quantity will be important with this approach for a full-time real estate investor. It will take multiple flips to really start seeing meaningful earnings.
Lastly, you have the full renovation strategy. This will require the largest upfront investment of time and money. The property will go through a complete renovation or remodel. The appeal of this approach is a bigger potential payout at the end. A savvy house flipper can turn an ugly fixer-upper into a dream home that can fetch a much higher selling price once the renovations are complete.
Finding the Right Houses for Your Flips
How much money you want to invest and how much work you want to put into a house flip is ultimately up to you. It may depend on the property you are buying, as some require more work than others. You may target especially run-down properties that you can purchase super cheap. Then, you invest more money into the renovation. Or, you could go after the houses that don’t really need a ton of work before they are ready to flip. The owner may be motivated to sell for a number of reasons, so you can get a quality house in a nice neighborhood. Fix it up just enough to turn a good profit.
The wholesaler approach can vary from investor to investor. Some real estate wholesalers buy up nicer properties from highly motivated sellers. They purchase for cash to reduce the price and then resell for a higher price. Then, there are wholesalers who target properties that need more work, with the intent to resell them to other house flippers who are willing and able to complete the renovation.
Business Planning & Budgeting
The key to your house flipping plan is to have a consistent business plan. Most investors find their niche over time. The more you can define your approach and refine the way you purchase, renovate and sell properties, the more successful you will likely be. “Figuring it out as you go” is generally a bad idea. Have a plan in place. Know what types of properties you are looking for, and set a budget for the purchase and any renovation costs you are willing to spend. Understand the resale market and make smart decisions when it comes to your house flipping business.
For more resources and access to exclusive off-market listings great for flipping, join the PropertyLark home buying network.