In the recent past, the house flipping trend has become a craze. Statistics have shown that on average, flipped homes in the US earn a gross profit of $29,342. This profit is almost the same whether you flip houses worth $100,000 or $200,000. Many people have found it a great way to make money, often with an almost 50% return on investment depending on what state you’re in.
If you are looking for a finance loan for your next purchase, fix and flip loans may be what you need. These loans provide quick access to capital, and speed is the name of the game since the faster you can access the loan, the quicker the fix and flip and the higher the reward. Check out these top tips for becoming a successful fix and flip loan borrower:
1. Never Buy a Mechanically Damaged House to Fix and Flip
When choosing the right home for a flip, focus on houses that mostly require just cosmetic improvements. If the home needs a new roof or its electrical system is outdated, it will take up too much of your money and may not return a healthy profit. Also, avoid homes that have foundation problems unless you can fix them yourself.
It is always advisable that you focus on lower cost improvements that have a huge impact. These include a coat of paint, refinished hardwood, new carpeting, and kitchen appliances.
2. Don’t Overpay on Property
One of the biggest issues that surround real estate is some agents may sell a house at a higher price than its actual value. To find the right agent, do thorough research and make sure you inspect the home properly.
It always helps to have someone in your team who will offer a second set of eyes when purchasing flips. This person should be an experienced realtor who will thoroughly analyze and come up with the appropriate purchase and resale price.
3. Sharpen Your Marketing Skills
The last thing you want is to buy a house that will take too long to sell, so you need to make sure that you sharpen your marketing skills. You also need to have a list of the renovations you have done including the features, amenities, and workmanship. With these, it will be easier to tell your buyer why the property is good for them.
4. Carefully Map out Your Profit Margin
Before making a purchase, take time to precisely and carefully calculate your profit margin on any flip. You should weigh this against your costs, including your holding costs.
You should also consider the costs of stress, anxiety, and the level of strain you will encounter in the flip. Include all that in your profit margin, and see whether the price range is a reasonable one for the buyer.
5. Have an Exit Plan
The goal of fix and flip is to sell the house fast enough to make a good profit. However, in some cases, there are things out of your control that may change the outcome. For instance, if the real estate market shifts, an economic crisis happens, or there are changes in the financial rules, you may not make a profit at all. There are also times where you spend more than you originally thought you would, you may have overestimated the price of the property after renovations, or taken too long to complete the project.
You should plan for an exit in case of any unforeseen issues. For instance, you may have to hold and rent rather than take the loss. For this, make sure that the property can increase your cash flow and still make you some money.
If the worst happens and you have to keep the house, ask yourself, will it still make you some money? If yes, then it is a good buy. If not, look for other options.
6. Don’t Look for Deals, Create Them
There is a huge difference between high-level investors and those who are just getting by. Most investors will say there are looking for deals. However, your goal is to create a system that brings these deals to you.
High-level investors will never be found saying that they cannot find deals. They are never really looking for deals. Instead, their businesses are set up so there is constant lead flow.
These systems are made of people who sift through the leads and follow up to see if there is any potential for profit there. They run these businesses through KPIs and dashboards. Their main aim is to empower their teams and systems to make their businesses better.
You need to surround yourself with people you can learn from. Find podcasts, forums, and books that will also help you in your initial steps. If you surround yourself with struggling investors, it will slow you down.
7. Find a Reputable Hard Money Lender
Once you see a piece of property you want to flip, ensure that you make secure finances that will help you make necessary renovations. Keep the profit margin in mind and consider the interest rates before taking the loan.
Take time to research and find a reputable lender with competitive rates. You also need to ensure they can give you the hard money loan in 14 days or less.
Take a Fix and Flip Loan
There are a lot of risks involved in conducting a fix and flip. If you are not certain of what you are doing, you risk losing your investments. So be careful when looking for houses and financial support to ensure you reap the bountiful rewards from each project.
Check out our website for more information on where to find the best money lenders.
