Most people wonder about the basics of home flipping and fixing. Generally speaking, the process is not cumbersome and can be achieved by anyone with the time to do proper planning and intelligent investment. In order to identify the best properties for fixing and flipping, you have to spend a considerable amount of time researching the local real estate market you seek to invest in and know the lenders available to them. A successful flip is reliant on a combination of proper financing, having knowledge of the market and having a product which is both attractive and comes with a good value.
There are a few major tips that would help an investor identify the best fix and flip investment properties.
Estimating Renovation and Repair costs
The very first step in identifying the best property for a fix and flip investments is knowing what it would cost to carry out renovations and repairs on the home. These are basically needed to bring the home up to par and equally justify a higher selling price given that the aim of the home flip is profit making.
You equally need to know the current value of the home as compared to what it will cost or what you will be able to sell it for after renovations. Having this figure in mind is critical as you should never lose perspective and let renovations get out of hand to the extent that your profit margin is wiped out completely. In most cases, it’s common to totally misjudge the exact cost of renovations. Things can crop us as renovations start, bringing totally unexpected expenses into the equation. This is why it’s imperative to be able to identify a house which requires just cosmetic fixes to elevate its value. That is a home with no electrical, plumbing and heating/cooling system problems. You should equally stay away from any properties with water damage since costs of replacing a water damaged area can be very costly and time-consuming.
Focusing Your Search on Good Locations
The basic rule of real estate is ‘location, location, location’. The value of any home or commercial building is greatly influenced by its location. For a fix and flip real estate investment, the homes that fetch the most profit potential are located in neighborhoods where property values are rising or likely to rise. To find such promising areas, you need to do a lot of driving around. A few pointers can get you to such neighborhoods.
- Search in transitional neighborhoods: Poorer neighborhoods that are on the fringe of becoming ‘good’ neighborhoods can be termed transitional. Undervalued properties can be found in areas and with a fix job, many homeowners in the area could equally take interest and improve their homes, spreading a trend which can boost the value of your flip property.
- Search in inner-city neighborhoods: A marker that an inner-city neighborhood is improving is the opening of a huge chain store or deluxe coffee shop. These chain stores do a lot of market research to determine the profitability of the area. You can thus be assured that any area they choose has the potential for increasing property values.
- Search in older neighborhoods: Scout older neighborhoods made up of primarily single-family residences. Most of these houses are at least 20-30 years old, aging well but still have wear and tear issues. These homes will fetch a good value with young families looking to start buying homes.
- Locations to avoid: Recent developments with properties that all look similar are not worth your while. They constitute a poor choice for flipping as they are not aged enough to need significant improvements thus flipping won’t fetch significant profits. Avoid poorly located homes too nearby undesirable features like a school, hospital or large garbage bin as reselling is quite difficult.
Foreclosure Homes
An easy way to make good profits off a real estate investment is purchasing foreclosure homes. These a commercial building and homes being sold by the banks, which are trying to make whatever money they can on a defaulted loan. You will be able to save up thousands as you pay significantly less than the market value for such properties. With a few renovations, the homes could be resold for top dollar. However since so many people are searching for such homes, you’ll need to be persistent in your search.
Investing in real estate is a great way to grow wealth, yet you need to be able to identify the best opportunities. Home flipping is really about precise estimations. Estimating how much value will be raised and the possible selling price. You need to walk this line carefully as rushing into a prospective home flip without proper planning could end up being a big loss. Fortunately, real estate software solutions such as Zilter can give you a major advantage!
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