Actionable Tips to Finding a Property to Fix & Flip
When choosing a property to fix and flip, success is generally predicated on picking the right property and buying at the right price. Money is made at the time of the purchase, not the sale. Buying something outside of your budget or that requires too many repairs, for example, can squander your investment and leave you with little to show for your efforts.
If you want to increase your chances of success, picking the right property is critical to your success. These actionable tips can help you make the right choice when shopping for your next fix and flip, helping you to make the most of your investment and increase your ROI.
Pick a Property You Like
Most property investors think primarily about profits when choosing a property. This makes sense, of course: a property with great potential is far superior to one with major limitations.
However, the pursuit of profits isn’t the only factor involved in making a decision. In many instances, it’s best to pick a property that you actually like and could see yourself living in. This mindset may not seem logical – after all, you’re not the one who will be living there – but it does come with some major upsides. An emotional investment can help you make design choices that cater to your preferences rather than stylistic decisions that may not actually accommodate real buyers.
When you visualize yourself living in a particular property, you will be better positioned to see the potential in a space rather than attempting to make best guesses. Further, you’ll have a better idea of how to proceed with renovations upon purchase because they’ll mirror the things you like to see in personal properties. Yes, not all buyers will like the same amenities you do, but by using your preferences as a guide, you can ensure that at least some of your upgrades will align with the needs of current homeowners in your area.
Make Friends With Contractors
You can estimate the costs of repairs all you want, but only an experienced contractor can provide construction quotes that reflect with the current state of the market. Instead of eyeballing renovations and guessing what fixes you’ll need, partner with contractors to assist as you’re evaluating properties.
With a knowledgeable contractor by your side, you can get a good idea of what changes a fix and flip will need very early in the purchase process. For most investors, contractors are a second step, but when you get expert advice prior to making a purchase decision, you can avoid inadvertently choosing a property that needs far more work than you realized or making an offer that underestimates the total cost of renovations.
If possible, bring a contractor with you when you tour properties. This will give you access to expert feedback in real time. If you think the kitchen needs an overhaul, a contractor can give you an idea of what changes will be essential. Contractors can also note issues that may be hard for a layperson to see. For example, you may think a kitchen remodel necessitates nothing more than new counters and cabinets, but a contractor will be able to tell if wiring is also an issue. This can prevent you from buying a property that will involve a much larger investment in renovations than you expected or making an offer that does not take the cost into account.
Focus on Less Fixing and More Flipping
For many investors, turning a fixer-upper into something amazing is a primary goal when fixing and flipping properties. This is certainly a big part of the process; fixing and flipping not only benefits neighborhoods in which homes currently don’t appeal to buyers but also the investor performing the fix and flip. However, to remain focused on the goal of maximizing returns.
Regardless of the capital you have to spend, the flipping part of the process is more important than the fixing. The longer repairs take and the more they cost, the less return you will see on your investment. If, for example, repairs take you the better part of a year, that’s a full year your money will be tied up in your fix and flip property instead of helping you grow your wealth through future investments.
When evaluating properties, choose ones that will allow you to put the bulk of your effort into the marketing and sales process required to attract buyers. During property hunting, try to focus on properties in which repairs are either largely superficial and quick to complete or are in areas that allow for the highest increases in market value. A property that requires serious TLC can be a satisfying project, but it more than likely won’t help you see a substantial return.
Stay in Areas You Know
So many factors play a part in the price of a property, from school districts to crime rates to employment opportunities. A house that would garner a high price in one neighborhood may sell for substantially less just a few streets away. As such, it’s important to understand the factors that influence housing prices in your region – and that includes geography.
It may seem logical to expand your real estate search as much as possible for the sake of increasing the property pool, but this can be more dangerous than advantageous. Buying property several towns away may seem like a great idea on the surface, but if housing prices in that neighborhood are much lower than those in your city and the property you purchased needs substantial upgrades, you could find yourself facing a poor ROI.
Instead of rolling the dice and hoping for the best in regard to home pricing, stick to areas you know and understand. A sure thing is less risky than a property that seems appealing on the surface but may not be able to meet your expectations due to differences in the real estate market.
If you do want to purchase outside of your comfort zone or in areas you’ve never invested in before, spend plenty of time doing your due diligence before buying. Purchasing in the wrong market can mean a reduced ROI or, even worse, a loss. Never jump into a purchase unless you’re sure the market can sustain the results you have in mind.
Compare Recent Sales
There’s no better way to know the current state of the market than to look at recent sales. As an investor, you’re likely always looking at relevant data related to home sales in your area, but it’s easy to leap into a purchase without taking time to do the right kind of analysis.
Before making an offer, be sure you review purchase data not only for properties in your neighborhood in general but for comparable properties with similar dimensions and features. This may take quite a bit of legwork – listings aren’t always clear on things like renovation dates – but the more you know about properties that are similar to what you’re envisioning, the better. Take into account as many factors as possible when doing your due diligence, from number of bedrooms to upgrades.
Don’t take anything for granted during this process, either. For example, a house with the same specs but in a better school district will probably command a higher price than a property you’re considering in a lower rated school. Be as conservative as possible; it’s best to underestimate rather than overestimate.
As a real estate investor motivated by a high ROI, it’s easy to equate fixes with higher profits. However, experienced investors know that this isn’t always the case. Putting too much money into a property in need of an overhaul can mean squandering your returns, and that’s every investor’s worst nightmare.
Properties that seem like a stretch, whether that means pricing that’s too high or renovations that seem substantial, can be a death knell to your ROI. Further, this kind of project can be harder to finance, especially if you’re not in a position to pay in cash for the entirety of a project. Bigger loans can be more expensive and may require a longer approval process, which can stand in the way of getting your project off the ground.
Rather than taking a leap on a property that may require an overinvestment, hedge your bets by staying well within your budget. Don’t pay too much for properties that may be a stretch, and don’t splurge on properties that might require too many renovations that can drain your accounts dry.
Get Estimates Early
The amount of work required to properly fix some properties can be hard to gauge, especially for those who are taking on a larger project than usual or have some big ideas about upgrades to make. It can be tempting to jump right into the biggest projects, like remodeling the kitchen, and leave smaller tasks for later, but failing to get estimates early can mean spending too much, too soon.
Ideally, the best time to solicit estimates is prior to putting in your offer. A property inspector can let you know key areas of damage that will definitely require attention, which can aid you while planning how to approach your fix and flip. Once you have a good idea of what kind of improvements will be essential, you can begin working with contractors, electricians, plumbers, and other professionals who can help you get an accurate idea of what you’ll need to put into a property before making the commitment to purchase.
By forgoing estimates, you can find yourself balancing many things once you begin the renovation process. Say, for example, you think the kitchen renovation in a property you’re considering will be fairly straightforward. However, the plumbing may be outdated in a way that isn’t apparent to anyone but a plumber. Seeking an estimate will give you this information up front, ensuring that you’re moving forward with realistic numbers rather than ballpark figures that could be materially inaccurate.
Estimates are, of course, only educated guesses, and some quotes will change over the remodeling process. However, soliciting estimates before you make a purchase can provide a realistic starting point for estimated expenses.
Finding the right property isn’t a science and what looked like a sure thing at purchase won’t always be the winner you thought it would be. However, the more you do to prepare, the easier it is to ensure you’re making a smart choice. From picking properties you personally like to making sure you have access to contractors and other professionals to pinpoint anticipated pricing, taking the right steps from the start can lead to a great purchase and a high ROI.
Fund your next Fix & Flip Loans with Westpark Loans! Fix & Flip Loans typically close in as little as 48 hours. We make sure you have access to the cash you need in the shortest amount of time possible because we understand that time is of the essence when trying to secure a prime fixer upper.