Real estate investing is hot right now. With so many HGTV fix-and-flip shows, everyone seems to have an interest in rehabbing a house and making a tidy profit.
But beware! Real estate investing, especially flipping houses, absolutely requires professional advice and an experienced real estate agent to guide your decision-making. We’ve done a number of flips in several markets over the years, and here’s the top five things that we’ve learned.
1 – Location, location, location
Find a home in a desirable neighborhood or one that’s on its way up in the very near future. I can’t stress this enough. You can improve a house all you want, but it’s virtually impossible to improve an entire neighborhood on your own.
What should you look for? Areas with rising real estate sales, employment growth, new shopping and dining options, infrastructure developments and other indicators that the area is thriving.
2 – Numbers, numbers, numbers
Most inexperienced investors only look at the pot of gold at the end of the rainbow and fail at doing an in-depth analysis of how to get there.
Numbers should drive absolutely everything you do in real estate. If the numbers don’t work, as hard as it can be, and no matter how much you like the property, or the partners, or the neighborhood, you need to walk away.
If you are sloppy with your estimates, and don’t account for hidden or unexpected carrying or renovating costs, you will be left disappointed with the results.
3 – Find the right things wrong
When looking for a property to flip, especially if you’re just getting started, focus on homes that require mostly cosmetic improvements.
A house or building that needs a new roof or plumbing will very likely require investing too much money – and time – into the house to turn a nice profit.
Focus on homes where inexpensive improvements can have a huge impact on how the home shows, like a fresh coat of paint, new carpets, sanding and refinishing hardwood floors, replacing trim and sleek new kitchen appliances.
4 – Plan for an alternate exit strategy
Every flipper’s goal is to buy low, sell high and fast and make a tidy profit. But there will always be factors out of your that may change your projected outcome.
What if the market you bought in shifts? If financing rules or interest rates change? If the economy tanks? It’s a real possibility that you may be unable to sell your finished property for your ideal price.
What’s more, you may spend more than your original budget, overestimate your sale price, or take too long to complete your project. So planning to rent your property or live in it, rather than taking a loss, is sometimes a better option.
5 – Find a great contractor
If you’re handy, you may opt to do some or most of the renovations yourself. This can save you a significant amount of money – if you know what you’re doing.
Knowing when to do it yourself and when to hire an expert is crucial. Hiring a general contractor can be expensive, adding up to 20% on to your renovation estimates. But they can be worth their weight in gold.
A great contractor can help you avoid costly mistakes and save you significant time, which means you can list your property faster and reduce your carrying costs.
Think flipping is for you? We’d love to help you find a property that’s right for you and set you up for success. Contact us today!