Top 10 Tips for First-Time Fix and Flippers

Top 10 Tips for First-Time Fix and Flippers

Fix and flip investing is an attractive prospect for people looking to get into the lucrative world of real estate. It helps investors get experience with each stage of the real estate process and can also offer attractive returns in a relatively short time period. The proceeds from a flip can also serve as the perfect launchpad for other, more long-term investments.

However, there are quite a few things you’ll need to know if you want to have a successful fix and flip investment. From finding suitable properties to performing renovations and finally marketing and selling the home for a profit, it can be somewhat overwhelming for a first timer. In order to help you find success, here are the top 10 tips a first-time fix and flipper should know.

couple looking into the blueprints of a home

1. Start with a Solid Plan

Put simply, every profitable real estate deal starts with a good plan. This typically means putting together an accurate and realistic budget for your project, along with conducting thorough market research before making any purchases. For your budget, be sure to include renovation and holding costs in your estimates along with the purchase price of the home. You may also want to leave some extra room for unexpected costs that can arise throughout the process. Finally, for any market you are considering, you should look at the direction home prices, population numbers, and rent are trending to get a better idea of the area’s investment potential.

2. Choose the Right Property

After you have selected a suitable market, you’ll need to go out and find a property that’s worth flipping. Location is a very important aspect of real estate, so you will want to search through desirable areas that you know will be in high demand. The struggle is finding a neglected or older property located in one of these neighborhoods. Ideally, you want your renovations to add enough value to a property that it can grow to match those of surrounding homes. You don’t want to invest in a property that will require too much of your time and money though, so consider hiring a property inspector to get a better idea of the amount of work needed to get a property in shape before making a purchase.

3. Secure Adequate Financing

The next question you’ll need to answer is how you plan to fund your project. It’s great if you’re able to finance the project with your own personal funds, but most people will be wanting to seek out financing. You have a few options available to you for funding a fix and flip; there are always traditional bank loans, but most will have an extensive application process coupled with loan terms that are not ideal for home flipping. Alternatively, you can work with a private lender to obtain a short-term loan. These loans are generally better suited to flipping since they range from 6 to 24 months and offer additional funds to cover renovations on top of acquisition costs.

4. Assemble a Reliable Team

Next, you should work to assemble a good team for your project. Generally you will want to find a qualified real estate agent, a trusted contractor, and an accountant or similar tax professional. A quality real estate agent can help you find a good property to flip, and also help you sell when the work is completed. And good contractors will ensure that work is completed on time and properly. Be sure to screen each potential contractor by asking for a portfolio of their work so you can get an idea of how they typically operate. Last but not least, you should look to work with a tax professional, as they can help you maximize your tax savings and get the most out of your investment.

5. Understand the Legal Aspects

There are also some legal aspects to fix and flipping you should understand before diving into a project. First, ensure that you have all necessary permits in place for any project you undertake, especially if it involves major work like digging or making new additions to a home. You will also need to ensure that all your contractors are properly licensed and insured, as this will protect you from any legal liabilities. Finally, for any work you are contracting, be sure to draw up a detailed agreement that lays out exactly what results you expect from the contractor and the agreed-upon pay.

6. Focus on High-Impact Renovations

Now comes the bulk of your project’s work: performing renovations. In order to get the most value out of the renovation stage, you’ll want to target high-traffic areas such as the kitchen, bathrooms, and living rooms. These rooms tend to show their age sooner than others, so the upgrades you make here will have the biggest impact on the look and feel of the property. Don’t neglect the power of curb appeal either, as the exterior is often the first thing browsing homebuyers will see and where you will have the opportunity to leave a lasting impression.

7. Stick to Your Budget

For any other upgrades you make, be sure to measure their cost against their potential value add. You will want to avoid over-improving the property beyond the standards of the neighborhood’s surrounding homes. Unnecessary upgrades will just eat into your budget quicker, and often times they will only end up pricing out a portion of your buyers. It can be helpful to dedicate a specific amount of your budget to each room/section of the home in order to avoid overspending. Careful budget allocation and tracking of expenses will help ensure that you don’t blow through your initial estimates.

8. Time Your Market

It can be difficult to perfectly time your purchase and sale to maximize your investment’s returns, but there are a few tips we can provide that may help you. First, understand that real estate tends to follow a seasonal cycle, with increased purchase activity in the summer months and less in the winter. You can secure a good deal by purchasing a property in the winter, and then benefit from selling it a few months later once demand starts to pick up. Regardless, you will want to focus on a quick turnaround for your project, since the longer you wait to sell the more you will be paying in holding costs like taxes, insurance, and loan interest.

9. Effective Marketing Strategies

Apart from working with your real estate agent to get the home listed, there are some other strategies you can employ to get the word out about your property. You should start by putting in the effort to create a stellar listing that includes great photos of the interior and exterior, along with detailed descriptions of the property’s best features. A great place to promote your listing is in real estate groups on social media. Facebook in particular has a number of local real estate groups filled with motivated buyers all browsing the same market. Once you think you have drummed up enough attention, you can host an open house or schedule showings to move forward with any promising prospects.

10. Learn from Each Project

The best lessons about fixing and flipping will be taught from your own personal experiences. As you go through the process for the first time, your strengths and weaknesses tend to show themselves, and you can learn by taking a look back at how everything went. Due diligence is important for every step of the process, even when all is said and done. Be sure to conduct a thorough review of your project to identify your successes, and where you might be able to improve for next time.

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.