More than 5.6 million homes were sold last year and a portion of those were fix and flip properties. These are often great investment opportunities to turn a profit and make some extra money.
A fix and flip project can quickly go wrong if you’re not careful. Then you’re bound to lose money and be put in a negative situation you’ll have to figure a way out of. The best thing you can do to ensure success is to have a clear understanding of how these transactions can be successful and make a solid plan.
Here are nine things to think about and figure out before you ever start flipping houses!
1. Meet Higher Purchase Requirements
First things first, you’ll need to make sure you will be able to purchase a home at all. If you’ll need financing for either the purchase or the renovations it’s highly beneficial to meet more than the minimum requirements.
When you have a great credit score and have a positive financial situation, you’ll be able to get the best deal possible. This means you’re more able to make money in the end when you sell the home. Checking with lenders to see what the requirements are can give you a good view of where you stand.
2. Financing Options Matter
When you’re purchasing a home to live in forever, the financing options mean something different than when you’re going to try to sell the home for a profit. In this scenario, you’ll want the loan option that will be the easiest to repay so you can keep more of the money after the sale.
It’s crucial to work with an expert to set up your fix and flip investment for success.
3. Consider the Local Market
It’s not always the best time to purchase a home with the intention of doing a full house renovation. Sometimes, the local market is such that homes aren’t selling for a high enough price point to make any money on the sale.
That’s why it’s so important to do extensive research on your local market before making any real estate purchases. You can see what similar homes are selling for and get a good estimated idea of what you could make once the entire project is done.
4. Set a Budget Before Purchase
Once you understand that the market and your financing options will work in your favor, it’s time to figure out if your renovation budget will as well.
Take a look at the home and figure out which things you’d like to improve, get estimates for the overall cost of those projects, and then see where that would leave your investment overall. It’s crucial to have your budget in order before you begin so that the spending doesn’t get out of control.
5. Ability to Enforce the Budget
Those who have been a part of renovating properties surely know how quickly the budget can get out of control if you’re not careful. It’s important to decide what expenses will be beneficial and which wouldn’t in the long run.
Then you need to take a hard, realistic look at your abilities and decide if you’ll be able to stick to that budget or not. Even just a few extra purchases can throw off the whole thing and cost you money in the end. You have to be able to stay in control if you want this investment to work out in your favor.
6. Connections with Renovation Experts
One thing that helps move a fix and flip along to make money quickly is using professional contractors where possible. This does add expense but can also mean things get done quicker as well.
Looking at what connections you may have to professionals is good to do before starting your project to get a good idea of what it will cost and what you’d like to do on your own.
7. Plan for Extra Expenses
When you’re setting your budget, you’ll obviously focus on spending money where it will increase the property value. But it’s also a good idea to make sure you can add in a little extra to your funds for those unexpected necessary projects.
It’s just a fact of life in renovating properties that unexpected issues will pop up from time to time. You want to be prepared for those so they don’t throw your whole plan off.
8. Ready to Change the Plans
Making all of the plans is crucial to being able to make money on a fix and flip. Chances are, there will be things that don’t go according to plan along the way.
There will be unexpected issues, the market can change, and many other circumstances out of your control can pop up. In order to stay level-headed and make the smartest decisions, you have to be prepared to be flexible along the way.
9. Leave Emotion Out of It
Houses often hold a lot of sentimental value and emotions can get tied up in them easily. When you’re working on a fix and flip investment, it’s key to keep your feelings in check and stay focused on the business end of things. Before jumping in, realistically decide if you can adopt that plan or not. It will save you a lot of heartaches if you can!
Things to Think About Before Investing in a Fix and Flip
When done correctly, investing in a fix and flip property is a huge opportunity to increase your wealth. It just takes some effort upfront and the ability to make smart decisions throughout the process.
Many find it extra helpful to work with fix and flip investment experts to figure out just what to expect. They also love to get advice on how to make their project successful. This is especially true when it comes to being able to purchase the home in the first place so you can make a profit in the end.
If you’re interested in learning more about your financing options and how to start a fix and flip project, contact us today!