Think the real estate market is too tough to invest in? Think again. There are some real bargains out there waiting for their Cinderella story. But it’ll take more than a magic pumpkin to transport these treasures to flip status. When selecting the right property to flip, think analytically. Use a mortgage calculator to determine your total investment, including price, closing, and renovation costs. Then take inventory of what the location has to offer, along with prices of similar nearby homes on the market. Use the 70% ARV rule – which means you buy and renovate for 70% or less than the final selling price of the house. Once you’ve zeroed in on your property, get ready to move fast – both securing the mortgage and taking aim at renovations. Follow these five tips to minimize costs and maximize profits.
1. Make The Right Offer
If you’re shopping off the MLS (Multiple Listings Service), prepare to offer quickly if it’s a great deal. If you aren’t yet experienced enough to know what’s good and what’s not, look for houses on the market for 60+ days and make a low offer. 20% less than list price is an acceptable version of low. By 60 days, the seller may be getting impatient and realize that they initially listed too high.
2. Research The Repairs
There are repairs that can be generated quickly and cheaply, and those that cannot. Details such as worn carpet and linoleum, outdated wallpaper and lighting fixtures, and shabby doors are on the easy-to-fix list. But when it comes to a leaky roof, faulty electrical wiring, cracks up the side of the house, or perhaps the most insidious ailment of all: mold, expect a greater investment of both time and money. If there is any possibility that the house may be better off torn down and rebuilt, this is not a fix & flip property.
3. Match The Repairs To Your Skill Set
The fewer reasons to hire professional contractors, the better. Consider your skills at home projects. Have you ever refinished a wood floor, installed a sink or replaced a gutter? Will you enjoy learning how to do these things? Sanding a floor, for example, requires elbow grease, but it is not difficult to do. Varnishing may be best left to professionals, mainly because of the fumes, but is also doable. Make a checklist of what this property needs to turn a profit, then decide what you can do to offset the cost. The more boxes you can tick, the greater your return on investment.
4. Buy Overstocked or Discontinued Building Materials
Your local building supply store probably has inventory they need to clear. If it’s close enough of a match to what you were in the market for, and there’s enough to cover your project, cash in on the savings and stop shopping around.
5. Strategically Stage
Don’t overlook the impact of a nicely staged house. To eliminate additional investments or rental costs, use the better pieces of your own home furnishings. Be sure to float furniture away from the walls as a way to give the room an open, airy feel. A few other stylish touches you can achieve on a budget include placing new candles and towels in the bathrooms for a spa effect and placing fresh cut flowers (even clippings from your own yard) in vases. These simple gestures can transport the house you’ve revived from being just another property, to a new home in the potential buyer’s eyes.