Thinking about flipping real estate as a means to earn a living? Though you might have seen shows like Flip or Flop, Property Brothers, and Flipping Vegas and witnessed the guys rake in thousands of dollars in profits, the road to real estate flipping success as not as cut and dry. In order to be good at investing in and flipping properties, one must do their due diligence to ensure that their finances are intact and that the property they choose will yield the best return on their investment. Below are a few tips you might find beneficial:
-Before Searching for Properties
There are a few things you should do prior to searching for real estate. Like any purchase of property, you will need to:
Know Yourself– If you’re going to obtain funding for your real estate flip you will need to have decent credit. If you haven’t done so already review your credit score to ensure there aren’t things that need to be fixed. In addition to learning about your credit score you should have a full understanding of your own assets, debts, spending habits, etc. To take on the risk of a property you should have pretty much everything else figured out first. We want to add a pillar to your financial portfolio, not another problem once the payments become more than you can handle.
Check out Financing Options– Unless you have a large sum of cash saved up to flip real estate, you’ll need to look into financing options. There are several companies that offer investment real estate loans. With simplified processes in place, borrowers have the ability to apply for a loan based on their funding needs and receive full service assistance on obtaining the necessary funding and paperwork to flip a property.
Define Your Type of Investment– Just like picking a menu item or a spouse we all have preferences when it comes to decision making, this should be no different. Investing in real estate can be done in a variety of ways based on your willingness to spend, risk, etc. Do you see yourself owning and renting a single family home a block away, or maybe you want to own a beach home you can use for fun while renting it out as a vacation rental. Another type of investment to consider is crowdfunded real estate. Teaming up with many other accredited investors to minimize your risk and maximize the brain power of many while picking your property gives you a huge leg up on going it alone. Unlike taking a penny from everyone in site, crowdfunded real estate is a club for the savvy and successful who can leverage the money and knowledge of many to make the right decisions on properties.
-Choosing Real Estate
Once you’ve evaluated the above steps you’re ready to being looking for the best properties to flip. As you look for properties, here are some tips to keep in mind:
- Property’s Condition – depending on how you obtain the list of available properties… (i.e. driving around, auctions, directly from homeowners looking to sell, foreclosures, etc.) you’ll want to get a good look at the condition of the real estate before deciding to invest. If you’re only able to review descriptions, pictures, or the exterior of the home as is often the case for auction properties, be sure to inspect what you can see thoroughly.
If this is your first time flipping a property, it is likely best that you stick with a home with fewer issues. This will be easier for you to repair, appraise, and flip. Homes with more damage though they may come at a more attractive price will often cost you more in the end to repair.
- Neighborhood Value – If you’re going to make a profitable flip then you need to consider the property value of surrounding homes in the neighborhood. Once you’ve renovated the property and completed all of the repairs, what will your return on investment be? You should be able to obtain a ballpark estimate of property value from a realtor. If the profit seems to be high then it is likely a property worth investing in.
- Location – Another thing that should be considered is the location of the property. If you want the property to in fact sell you want it to be located in a desirable neighborhood that people are interested in living in. As you research areas for investing, you should keep factors like local schools, crime, and attractions/amenities in mind. The more attractive a location is, the easier it will be to turn for a profit.
As you can see, choosing real estate to flip is very similar topurchasing a home for yourself. If you want to make a good return on your investment it is imperative to put yourself in the shoes of the potential investors, tenants, or homeowners. Locating a property that is structurally sound, in a good neighborhood, near attractions, and competitively priced can take time, but will pay off in the end.
Categories: Real Estate