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In today’s competitive real estate market, investors are searching for the best ways to make a good return against the backdrop of low inventory and high interest rates. Many investors have been turning to fix and flip properties as these projects offer attractive returns in a short timeframe. Along with being a profitable investment strategy, home flipping can provide desirable properties to underserved communities experiencing a lack of inventory. By utilizing some key techniques, fix and flip investing can also be one of the most profitable real estate strategies. Are you thinking of investing in a home flip for your next real estate venture? Here are 7 techniques to help you maximize your investment’s return.
#1: Understanding Your Target Market
The first step you should take, with any real estate project, is to conduct proper market research and compare all the options available to you. Start by taking a look at key data points like population, GDP, and the health of the local job market. These can be indicators of a rapidly growing area that would make for a good investment. You will also want to take a look at the demographic data to get a better understanding of the people you will be selling your property to. Younger demographics will have different preferences than older ones, as will markets that have lots of families with young children. You can tailor your renovation strategy to the demographics for better results when it comes time to sell.
#2: Setting Realistic Budgets
An important step of the renovation process is planning. Obtaining realistic estimates for your budget will allow you to properly calculate your return, and decide which investment to follow through with. It may be worth hiring a property inspector to give you a more accurate assessment of the level of work needed to get a property in better shape. From there, you can create a detailed budget with line items for each step of the work. You will also want to leave a contingency fund of about 10% to cover any unexpected costs that tend to crop up in the renovation process.
#3: Prioritizing Renovation Projects
Choosing the right renovations to perform will also help you maximize your return on investment. Your first focus should be on low-cost upgrades that’ll have a big impact on the property’s resale value. You can achieve this by making updates to the kitchen, bathrooms, and other high traffic areas. After that, you can start focusing on the property’s appearance. Some quick fixes include landscaping and replacing old siding, and also adding fresh paint to the rooms and the exterior. You need to strike a balance between investing enough to bring the property up to date, and not overspending on renovations that don’t add any real value to the home.
#4: DIY vs Hiring Contractors
The easiest way to save a bit of money when renovating a property is by putting in the work yourself, also known as sweat equity. If you have the skills to complete various projects around the property, why pay someone else to do them? Of course, it’s important to be realistic about your skillset and leave more complicated jobs such as plumbing and electrical work to the professionals. Hiring professionals can also save you loads of time, allowing you to focus on other, more-important tasks.
#5: Using Cost-Effective Materials and Finishes
Another way you can save is by choosing cost-effective materials during renovations. You don’t want to sacrifice too much on quality, but at the same time you don’t need to pay for top of the line materials. With some research, you should be able to find materials that fit with your overall design language without really affecting your bottom line. The key lies in finding a balance between cost and value, just like when choosing which renovations to perform.
#6: Streamlining the Renovation Process
Keeping an eye on the renovation process will allow you to deal with any delays that may come up and get the project completed sooner. The longer your project, the more you will have to pay in holding costs like loan interest, taxes, and insurance. That’s why most veteran investors aim to complete their flips in less than 6 months. You can achieve a streamlined process by staying involved in it. Keep in close contact with your contractors, and be sure that you are only hiring qualified professionals that you know can deliver within a reasonable timeframe.
#7: Adding Value with Smart Upgrades
Incorporating smart technology is a quick and easy way to boost your property’s value while adding some desirable functionality. For example, you can add smart locks, security cameras, and doorbell cameras that all work together to provide additional security. A smart thermostat learns the patterns of the home’s residents and automatically adjusts temperatures for energy savings. You can also add smart lighting that can be controlled through a phone app or a voice-activated assistant. Look into some creative ways to incorporate smart technology, as they can become key selling points when marketing and selling your renovated property.
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 looking to finance a fix and flip project, RCN Capital has competitive loan options available.