Getting prepared for a house flip is like a game of “Beat the Clock.” Time is money, and you want to spend as little as possible. Here’s what to do.
Buying Homes to Flip
Mistake: Buying Properties With Complicated Problems
The purpose of flipping a house is to purchase a property, fix it up and sell it at a much higher price after only a few months of work. This means that, by definition, you will be looking for homes that have some issues and a lower list price as a result. However, there are some fixer-upper properties that you should pass by. If your expected resale value is entirely eaten up by a mold problem, or you end up having to spend months repairing a series of smaller issues, you may want to rethink the property. Every dime you spend on repairs is a dime that comes out of your profit.
Mistake: Failing to Focus on Future Value
There are two price points you need to keep in mind as you make offers on homes to flip: the price you want to buy, and the price you expect to get when you sell. That smoking deal on a property may not be so hot once you realize that it is not in a good location. If you think too much about the price you are going to pay, you may overlook things that all buyers should remember: location, access to good schools and amenities, and a decent neighborhood. If you cannot afford to buy properties that meet these conditions, you may have to wait until you can. After all, your profit will be far higher if you buy a home with a better future.
Remodeling Homes to Flip
Mistake: Making Niche Improvements
As you start to plan out the repairs and upgrades, you need a sanity check to keep you from going overboard. Ask yourself, “What happens if a buyer is not delighted with the way I did this room?” and take time to consider the answer. Realistically, some buyers may not be ecstatic about your decision to separate the bathtub and shower in a bathroom, but they can still use it. Knocking down a closet or enclosing a room in the basement to create a wine cellar or home studio are too niche-specific to appeal to most buyers. Since your goal is a quick sale at a reasonable price, you should limit your improvements to things that buyers actually want.
Mistake: Not Researching Investment Value of Improvements
It is also worth noting that the money you put into improvements may not come back to you as massive profits. There are essentially two ways to classify upgrades that buyers want: home features they expect (and do not pay extra to get) and improvements they are willing to offer more to have. The bigger the repairs and upgrades, the less likely you are to get a full return on your investment. At the very least, you should put your money into updates that will make the home current and able to compete on the market. Target specialty upgrades to things that have the most bang for their buck.
To improve your profit on a house flip, you have to balance improvements with value. Keep both in mind and you will save a lot of money, time and stress.
Author: Preston Guyton – guest blogger
Preston Guyton REALTOR®
Broker in Charge/Managing Partner, CRG Companies, Inc.
7717 N Kings Hwy, Myrtle Beach, SC, 29572
http://www.crgcompaniesinc.com/
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