Flipping houses is a lucrative business, and one of the most critical decisions you make in the process is figuring out where to purchase viable properties. Many real estate investors tell you to focus your energy on the hottest markets, but truthfully it all boils down to the value and quality of a given location.
There is an abundance of opportunity for flipping properties in 2023, and it doesn’t really matter where you are—if you know what to look for. In this article I’ll be covering the key indicators that you’re flipping houses in a worthwhile location.
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1: Identify Popular Housing Markets
When it comes to finding, fixing, and flipping properties, it’s all about location, location, location. Nothing takes more precedence than choosing an area where there is a high demand for the property you’re rehabbing.
Anyone can renovate or build a stunning home and list it for a great price, but if the area isn’t desirable to your target audience, then you’ll have a hard time selling. The best ways to identify demand is to consult with local real estate experts and to use intuitive websites like Zillow or Realtor.com to compare and contrast current for-sale properties.
When you’re on the prowl, be sure to stay in a close range of the target area for your flip. The proximity you choose depends largely on the housing density of the desired neighborhood. In more densely populated areas like cities, a few blocks should work.
Likewise, for more rural and suburban areas you can afford to expand your search area a couple miles. And, if you can help it, try to remain in the same school district.
What To Look For
Look for and monitor properties that are similar to your flip in terms of square footage, room number, size, improvements, and amenities. How long has the property been listed? How many price reductions have been made? How many showings have there been? These are the kinds of questions you need to be asking before committing to a project.
If the number of homes selling in a specific area is low, then you may want to concentrate on flipping houses in a different location where there is more of a demand—and wiggle room for profits.
There are certain times where demand is high, but buyers are price sensitive. In these cases, finding the ideal price point for a neighborhood could make all the difference for executing a quick turnaround. Not only that, but it ensures that you’re buying smart and keeping your renovation costs on budget. If you can’t do that, that’s a telltale sign the flip isn’t worth your investment.
2: Look For Motivating Factors
With any property flip, real estate investors should always be looking for catalysts or motivating factors. The things that impact a local market in smaller cities are obviously different than those in bigger, more populated areas.
In smaller communities, things like the news of a major employer entering or shutting down can have a significant effect on local real estate markets. In larger towns and cities, real estate values are more influenced by trends than individual developments and employers.
Irrespective of size, things that impact all housing markets are things like school district ratings, crime rates, infrastructures, and new business openings. A smart real estate investor will identify up-and-coming markets with plenty of noteworthy developments, amenities, and accessibilities.
What To Look For
For example, flipping houses in neighborhoods where there are restaurants, grocery stores, gas stations, daycare facilities, shopping plazas, and recreation centers adds to a property’s convenience, which in turn, maximizes the overall value. Why? Because it affords homeowners a better quality of life and gives flippers a bigger after repair value.
To get the most out of your flip, pay attention to all available public information. Doing this helps savvy investors better predict where the largest areas of growth will be in a given neighborhood. And keep in mind that if you wait too long, you could risk larger profits.
3: Consider All the Costs Associated with the Flip
One of the most important things to consider are the costs associated with the entire flipping process.
Of course, it’s no surprise that it’s more expensive to renovate a home in Los Angeles, California than it is in Lansing, Michigan. Materials and labor expenses are no different. If the neighborhood you’re looking to invest in has a more booming economy, the more money you can expect to pay. No matter where you choose to invest, sticking to a budget—not exceeding it—is key.
What To Look For
When looking for a contractor, get at least three detailed bids and meticulously compare each one. If you think that you can get the same materials for the same price or less than what a contractor charges, that’s a good indicator you need to find someone else to do the work.
If you insist on buying materials yourself, shop around. Stick to larger retail stores as they usually have more competitive and affordable pricing than smaller ones. Keep an eye out for sales and buy what you need only when you need it.
4: Familiarize Yourself with Local Taxes
One of the biggest mistakes you can make when flipping houses is underestimating local school and real estate taxes.
Naturally, the higher the taxes on a property, the lower the market price of the home needs to be in order to compensate the buyer for any tax burdens. More often than not, it’s the local taxes that impact whether or not a homeowner can afford the property, not the price of the home itself.
You will have to fork over the money for school and real estate taxes, so keep that in mind when you’re planning your pre-purchase expenses.
5: Monitor Local School District Rankings
If your target audience is trying to accommodate homeowners who are also parents, education and local school districts are very important. When you’re looking at comparable properties, make sure they reside in the same district. Homes that are in nearby neighborhoods but don’t fall into the same ones aren’t really valid comparisons since all school districts aren’t created equal.
Even if the potential buyers don’t currently have children, school districts still matter because at some point, they’ll likely want to sell. If the area where you’re flipping houses is in a highly desired educational district, highlight that to potential buyers as it will garner you a bigger return on investment.
Become An Expert at Flipping Houses
It’s true that anyone can be a successful property flipper, as long as you’re willing to put in the work to understand the process. One thing is for sure, if you follow these criteria, you’ll be on the right path.
And if you get caught up, don’t sweat! I’ve helped thousands of new real estate investors navigate flipping houses successfully, and I can help you too. With over a decade of experience and countless resources at your disposal, you’ll be on your way to record profits in no time at all.
To learn more about finding, fixing, and flipping properties, visit the Wealth Connect and my eBook library for exclusive training materials designed to help even the greenest investor flourish in this field.
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