Finding fixing and flipping properties is an investment strategy in real estate. As a flipper, the goal is to buy a property, do some repairs and revamp it to top quality, then sell it at a higher price.
The property is this case are purchased cheaper than the market value due to the defects it has. Next, the defect is fixed and the property is brought to standard. At that renewed stage, the value of the property would have increased, and therefore be sold at a competitive price which is higher than the actual cost combined with the repair cost. The aim to purchase at a low price, and sell a lot higher such that the cost of repair is covered and there is still profit left.
Benefits of Fixing and Flipping
Like most businesses, fixing and flipping has benefits and downsides. First, here are a couple of benefits.
The return on investment in fixing and flipping makes it a profitable business. Depending on the number of property handled, the profit can vary. On average, a flipper can make as much as $40,000 to $60,000 per property. For an individual who is into flipping full-time, the profit can be twice as much if such a person oversees property projects simultaneously.
Either as full time or part-time, fixing and flipping works for all. If you wish to take it up full-time, then it’s a good line of business. If you have an existing job, flipping works as an alternative business — as a source of secondary income. It could be a perfect retirement plan. A word of caution is to avoid taking too many projects when into it on a part-time basis.
Adding Value to the Neighborhood
A neighborhood where houses are fixed and flipped regularly will enjoy improvement. Such distressed properties will undergo a revamp that will bring them up to standard and make them look like other sterling properties in the neighborhood.
Here are the downsides.
Financial uncertainty is something to deal with in fixing and flipping. Due to several reasons, a refurbished property may not sell fast, and thereby stay on for too long. In the process, mortgage payments, property taxes, and other fees will be required. And this may result in additional costs.
When a property is evaluated and assessed for damages that warrant repair, some things may arise. While assessing to get an estimate of repair costs, some issues may be hidden or missed and later uncovered which results in higher costs than what is planned. Speaking of discovering the unexpected while renovating, a seasoned home solution service provider states that at times, opening up the asbestos you may discover termites or mold which were not noticed during the assessment– an additional cost for repairs.
A lawsuit is a possibility every flipper must prepare for. Sometimes on selling a property, the buyer can file a lawsuit if problems arise due to damages resulting in things that are not well fixed or omitted during the repairing process.
After considering the benefits and downsides of fixing and flipping, the focus now should shift to how to go about house flipping.
Getting Started with House Fixing and Flipping
Fixing and flipping entails quite some processes. Here’s how to go about it.
1. Create a Budget
The first step is to create a budget — a budget that can conveniently run a project without hiccups. Expert opinion is that a budget should be four to five times bigger than want is deemed to be necessary. This is most beneficial if you are just venturing into flipping as a first-timer.
2. Search for an Appropriate Property
Search for an appropriate property that suits your budget. If your capital is robust, then you can jump on almost any type of property. However, if your budget is limited, then choose a property without the need for too much repair costs. To get the right property, look for auctions, foreclosures, etc. Sometimes, working with real estate agents could be beneficial as you would tap from their experience.
3. Make an offer
After ticking the first two boxes, the next thing is to make an offer. Learn to be cautious so you won’t purchase above budget. At this stage, it’s best to consider more than one option such that if one becomes unfit for your budget another may work out.
4. Have a Timeline
Not all properties have uniform repair costs and the same applies to the timeline for repair. The period of repair can span 6 weeks to 18 weeks or more. Allot enough time to conveniently complete the fixing without compromising on quality.
5. Hire a Reputable Repair Contractor
The fixing process is costly and the most integral aspect of the whole process. If the repair is not done right, then you risk selling a property with a defect. Check each type of repair contractor to see if they have all the personnel for every type of repair or you will have split the task. Overall, choose a contractor that can work with your budget and timeframe scheduled. Additionally, ensure to pick one with a license and reputation.
6. Make the Sale
After all the steps above, the next and final stage is putting up the home for sale. After the project is complete and up to standard, you can add it to property listings. Alternatively, contact real estate agents to speed up the process and help you reach a wider network. Real estate agents are experienced and know the market well enough to sell off the property at a good price.
There you have it! Here’s a simple guide on finding fixing and flipping properties. It’s not simple neither is it too difficult. Take note of the downsides and benefits of fixing and flipping and follow the process involved to make a success of it.