Making profit from cheap home sales may seem easy. However, fixing and flipping houses require more than just renovating a property. Such investment may look simple on TV shows, but real estate agents understand the risks involved.
Still, investors can realize an enormous profit from house flipping if they work hard and smart. A wrong decision can ruin your business. You have to perform a property analysis before buying homes, especially at auctions.
Finding a house that can yield a profit after fixing and flipping is not an easy task. You have to locate a property in a target neighborhood at a lower price compared to the real estate market. The tips below will help you to identify a profitable fix and flip investment property.
Locate a target area
Choose a neighborhood where you can make money from flipping houses. A district with good schools will be profitable for fixing and flipping homes. The proximity of the property to top rated schools in the area is a plus. It will increase the value of the flipped home. Prospective home buyers can pay more for houses in a neighborhood with good schools.
The local amenities available in the area can also add to the value of your property. Medical facilities, parks and other recreational centers, suitable dining spots and local libraries can attract home buyers. Nearness to a business district and shopping centers is essential. People also prefer an area that is accessible close to public transportation. However, your chosen neighborhood should not be near an airport or fire station to avoid noise. Bars and other late night spots can also interfere with the quietness of a residential area.
Besides, a well-kept location will appeal to potential home buyers. Choosing a neighborhood with neat lawns and porches will add to the value of your property. Even sidewalks and streetlights that illuminate the area at night are also vital. Avoid buying homes near vacant buildings. Such houses can discourage potential home buyers as they can serve as hideouts for criminals.
Choose an area that is close to your location. The proximity of the property will cut down cost during the renovation process. It will enable your team to complete the work on time. You can get leads on fixing and flipping properties from realtors, banks, and even friends.
Analyze the real estate market in your chosen area
You should understand the statistics of the business in the location you want to invest. Information from local websites, census data, and realtors will enable you to determine the types of homes that are in high demand in the area. The selling prices of the houses will allow you to make the right decision on a fix and flip investment property. Your ability to satisfy the needs of potential buyers will help you to maximize profit.
Comparing the properties on sale will help you to create a budget for your project. The information will enable you to calculate the cost of fixing the property. Compare sold homes that have similar features to the property you intended to buy. It is necessary to consider the duration the properties stayed on the market before sales. Homes that sit on the market for a short period make high returns.
A comparison of the property taxes on similar homes will be helpful. Higher charges can put off potential home buyers. You can get current information on property charges from local realtors. Such project analysis will help you to make the best deals.
Assess the condition of the property
Once you choose a target area, make sure you purchase a property without structural defects. Inspect the house for uneven floors and crack foundation. Flaws can increase the cost of the renovation and prolong the time for the completion of the project. A thorough home inspection will determine the specific repairs needed on the property. This aspect of property analysis is crucial to prevent financial loses. Contrarily, a home in the proper condition will attract buyers and increase your profit.
Avoid homes that may be difficult to change their features or make additions to them. Usually, adding new things to a property increases its value and can make it sell fast. You can increase the number of bathrooms in the house or adjust its design. Updating the features will make it attractive to buyers. Make sure that it will be easy to carry out repairs on the home. Hiring a general contractor will help to keep the renovation costs within your budget.
Installation of new light and plumbing fixtures, exterior and interior painting, new carpets, and appliances are essential. Though these changes will add to the renovation cost, they can lead to higher returns.
Create a budget for your project
A calculation of the probable value of your investment in house flipping will determine your profit. Make provision for unexpected expenses in your financial plan. Your budget should include the acquisition and renovation costs, utilities, insurance and costs from the selling process.
Estimate your expected returns
Compare your budget and the recent sale prices of homes with similar features as your property of choice. It will help you to deduce your potential profit. A higher return will compensate you for the money and time spent fixing and flipping the property. A calculation of the after repair value will enable you to fix the right sale price.
NOTE: This is where Zilculator.com can help you greatly. With the new Fix and Flip analysis you can easily calculate your rehab profit and show the investment report to lenders and capital partners. See Zilculator’s features.
Fixing and flipping of homes can be a profitable investment if you understand the basics of the business. Besides, you have to satisfy the needs and taste of your potential customers to convince them to make a purchase.