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Home flipping continues to be one of the best ways to make money with real estate investing. Flipping offers investors great returns in a relatively short amount of time, which can also serve as a launchpad for other types of investments. If you’re an investor who’s looking to get into home flipping, there’s a few things you should know before diving in. Not every property you come across will be good for flipping, but there are certain traits that you should be looking for in potential flips. Want to know how to find the best properties for flipping? Continue reading to find out how.
Define your criteria
The first step to finding success with flipping is having well-defined criteria for the type of property you’re looking for. You can start by identifying the market you want to buy a home in. Remember that you don’t have to limit yourself to markets near you, and there are certain “hot” markets across the country seeing increased levels of demand which can lead to a better ROI. Next, you need to assess your skillset to realistically determine the type of work that you can do yourself, and the jobs that will require a professional contractor. Last but not least you will need to establish a budget, but be sure to include the estimated cost of repairs and labor needed to renovate a property in this number.
Browse potential properties
After you’ve narrowed your search criteria, you can start browsing the open market for potential properties. The first places you should look are online listing services like Zillow or Realtor.com which will show you all the properties that have been listed for sale in your area. You should also look to work with a trusted real estate agent that’s familiar with your area, since they’ll be able to find you the best properties before anyone else knows about them.
Sometimes, you can find discounted properties at home auctions or foreclosure sales. These properties have enormous potential for returns, but they aren’t always in the best condition, so you’ll want to carefully inspect each property and avoid any homes that are in need of serious repairs which can kill your profit margins.
Assess the property
Once you have found some properties that could make for potential flips, you’ll need to evaluate them to see if they’re worth your time and effort. For most properties this will mean ordering a proper home inspection. These inspections can uncover problems that most people don’t see, and ordering one before you purchase a property might just save you from a bad financial decision. You will also want to take a closer look at the property’s surrounding area to ensure it’s a place people will want to live. Ideally the home should be in a safe neighborhood with easy access to amenities like shopping areas and things like good schools for family-oriented buyers.
Run the numbers
The last step before you make an offer on a potential fix & flip property is crunching the numbers to make sure it’s financially viable. With flipping, investors recommend using the 70% rule; this rule says that you should not pay more than 70% of a property’s After-Repair Value (minus repair costs) when purchasing a home to flip. It ensures there is enough of a profit margin built into your deal so that you can end up with a sizeable return. When estimating repairs, it can be useful to have an extra 10% buffer to cover unexpected costs that are likely to pop up during renovations. Finally, if you’re struggling to come up with accurate numbers when calculating values, remember that you can always hire an appraiser for a more professional estimate.
RCN Capital
The easiest way to save on your next investment is to obtain financing from a real estate lender that can get you the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors. If you are an investor looking to finance a home flip, RCN Capital has competitive loan options available. Connect with us today to discuss your next real estate investment.