There are many benefits to fix and flip investing, especially in today’s competitive, low inventory market. Home flipping allows an investor to bring a neglected property up to the standards of modern buyers and make a tidy profit from their efforts. They can also be a great way for a beginner investor to get into real estate, getting them up to speed with all the different aspects of the real estate process and giving them the funds needed to get started. Fix and flip investments have the potential to be very profitable ventures, but by utilizing certain techniques you may be able to take your returns even further. Let’s cover everything you’ll need to know about fix and flip investments and how to unlock their potential for maximum profit.
The best way to increase your chances of success with a fix and flip investment is to dedicate an appropriate amount of time to due diligence. These investments require a fair amount of capital, so you will want to ensure those funds are going to a good place. Before investing in any particular market, you will want to take a look at the numbers to determine if your venture is likely to be profitable. Key statistics such as population numbers, the direction home prices are headed, and the overall health of the job market will give you an idea of the market’s potential. The ones that are experiencing rapid growth will surely make for a better place to invest in.
Selecting the right property has to be one of the most important decisions you will make with a home flip. Ideally, you will be looking for an undervalued property that’s located in a great area and neighborhood. This way, the upgrades you make will allow it to grow in value and more closely resemble the properties surrounding it. Plus, having the home in a desirable location will mean more demand which can lead to a faster sale and a higher sale price.
Understanding how much work a home will need to get in better shape is also important. Be careful that you don’t invest in a home that’s beyond saving, or one that will require a large amount of capital to be repaired (or in other words, a money pit). Before you make a purchase, hire a professional property inspector to identify major issues, along with any smaller ones that you might have missed at first. They can also give you an accurate estimate of repair costs, and help you decide if the property is worth investing in.
The type of financing you choose for your project will have a direct impact on your final returns. You have a few options to choose from with a fix and flip investment, ranging from traditional mortgages to hard money loans offered by private lenders. If you have equity built in an existing property, a HELOC can be a great way to fund your project with little to no hassle. A standard mortgage can also work, but the 15 or 30-year term that it comes with isn’t suitable for home flipping, and these loans typically don’t provide funds to help cover renovations. Private loans on the other hand are more customizable, with shorter terms and the ability to provide additional funds for repair work. These loans are often easier to qualify for as well, which is important since certain banks may not be willing to finance any renovation projects as they deem them too risky. Be sure to compare multiple options so you can determine what the best fit is for your project with the lowest overall financing costs.
You also have to be careful when deciding on which renovations to make to your property. In an ideal scenario, you should make updates that add the most value to the home while costing you a minimal amount. In order to achieve this, focus your attention on high traffic areas like the kitchen, living room, bathrooms, and bedrooms. The upgrades you make to these rooms will have the biggest impact on the look and feel of the home and help it match the tastes of today’s buyers.
There are updates you can waste resources on which don’t add any real value to a home, and may actually put certain buyers off from moving forward with a purchase. That’s why you have to take care not to impose your personal style on renovations. When making style and design choices, stick to those that you know will have mass appeal; that means a neutral color palette for the walls and furniture, and avoiding any eccentric decorations. Leave some room for browsing buyers to see the potential for their own plans for the home.
The final step of the fix and flip process is where you will sell the renovated property and take in the returns from all your hard work. If you would like to ensure that you receive a good offer on the property, you can make use of some marketing and sales strategies. First, you should conduct some market research by taking a look at comparable homes in the same area as your property, and you can get a good idea of a fair price to set. Once you have that figured out, you can get to work on creating a stellar listing to show off the property. Be sure to include details about all the property’s best features, along with great pictures to show off these features. And consider hiring a professional photographer to capture the home at its best.
Then, you can make use of multiple marketing channels to get the word out about your property. “For Sale” signs and the MLS won’t cut it on their own. Post the property in local real estate groups on social media (Facebook is a great place for this) and market the listing within your own personal network. Even if your direct connections aren’t interested in the home, maybe they’ll be able to connect you with someone who is.
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 looking to finance a fix and flip project, RCN Capital has competitive loan options available.