How to Get More Out of Your Fix and Flip Investment
The goal of any real estate investor is to make money. That’s pretty obvious. How you make your fix and flip investment as profitable as possible isn’t quite as easy, though. You have to have a good plan and you want to do things right every step of the way to achieve maximum profitability.
If you are buying a property with the intention of flipping it, there are a number of factors you will need to consider and important steps you will need to take in order to be successful with your investment. House flipping can be very lucrative when done right. When done poorly, it can end up being a huge money pit.
Here are some helpful house flipping tips from PropertyLark:
1. Set Your Budget
Before you even start looking for properties to buy, renovate and flip, you will want to set your overall spending budget. Know where your financing is coming from to not only buy the house, but to pay for all the repairs and renovations that need to be made before it is ready to resell. Also, factor in any selling expenses such as real estate agent commissions and closing costs. Knowing your overall budget and financing plan will help you when you actually start the home search process.
2. Set Your Target ROI
Return on investment (ROI) is the key goal of any real estate investor who is flipping houses. Before you start your property search, you will want to determine your target ROI. In the simplest of terms, this is how much money you wish to clear at the end of the sale. This number has to be high enough to make the total financial investment and the time you need to put into the project worth your while. Be realistic in your projections and have a minimum target ROI in mind before you buy any properties. Some fix and flip investors follow the 70% rule, but ultimately you have to find a number that is right for you.
3. Analyze, Analyze and Analyze Some More
You have to run thorough analytics when looking at any property for a fix and flip investment. You have to determine what the property will cost you to purchase. You need to accurately project all of your expenses, including anticipated repair and renovation costs and any other ownership expenses during the time you expect to own the property (utilities, property taxes, HOA dues, etc.). Then, you have to figure out what the house could sell for on the open market once it is fixed up and ready to list. Subtract all your expenses from the selling price to get your projected ROI for any property you are looking at.
4. Be Conservative in Your Estimates
You will want to be extra conservative when it comes to your fix and flip analytics. This is the best way to ensure you don’t get in over your head and that you ultimately hit your target ROI. Whatever you think it will cost to complete the renovations, add a little more to cover any unexpected expenses or complications. The same goes for your time estimate. On the other end, figure out a realistic selling price range for the house. When doing your math, look at the highest end of the range of projected renovation expenses and the lowest end of the range for potential resale value. If these numbers don’t add up to meet your minimum target ROI, then the investment is probably not worth it.
5. Use Your Funds Wisely
You have a budget that you will want to follow as closely as possible. There may be some building materials that you can buy cheaper and other things where you want to spend more. Determine the best use of your funds during the renovation process so that you don’t exceed your budget while making sure the house still turns out nice enough to attract buyers and make a healthy profit.
6. Neutral is Always Smart
Be careful not to inject too much of your own personality into the renovation. When it comes to colors and features in the home, you want something that will appeal to a wider range of buyers. A unique design may get some extra attention, but it may not be as easy to sell because not everyone will like it. Think a little more neutral. Use materials, colors and design features that will attract more potential buyers at the price point you are looking for. Many buyers are still going to want to go in and make their own upgrades and design changes, so don’t waste too much of your own time and money on extravagant customizations that only appeal to a small segment of buyers.
These are just a few simple tips to help you as a fix and flip investor. The goal is to get more out of your house purchases and make your house flips as profitable as possible.
If you are a serious real estate investor looking for the best available properties, you should consider applying to join the PropertyLark home buyers’ network. We buy houses and run custom analytics on every single property. Once you are part of our exclusive network, you have access to our off-market real estate deals—houses that have been identified and analyzed to show maximum investment potential. Just fill out our brief questionnaire to see if you qualify for the PropertyLark system.