With such a high level of demand in the real estate market, finding good properties for home flipping has never been more competitive. In most markets, properties go in a matter of days, with sale values often exceeding asking prices. That means if you want to make money home flipping, you’re going to have to be at the top of your game. The good news is there are a few different aspects of fix & flip real estate you can focus your attention on to help you find success in the space. Continue reading as we go over some strategies you can implement when flipping houses in a competitive market.
Know your target market well
Before you decide to purchase a property in a certain area, you should take some time to gather valuable data on it. Things like population numbers, demographics, and job growth are key data points that can affect the profitability of an investment in a given market or neighborhood. You can maximize the return of a home flip by purchasing a property in an area which you predict will see high growth by the time renovations are completed, increasing the demand for your home.
In order to get your hands on this data, there are aggregators such as ATTOM Data which can provide you with all the info you will need on a given market for a relatively low price. Since location is one of the most important factors in real estate, having the right data can be key in beating out your competition and making a good return.
Develop a good plan
We can’t stress enough how important it is to develop a good plan that covers all your bases when flipping properties. It starts by coming up with accurate numbers for the After-Repair Value (ARV) of a property and the budget required to renovate it, which you can then plug into the 70% rule. The 70% rule states that when purchasing a home to flip, you should not pay more than 70% of the ARV minus expenses. This helps ensure there’s enough of a profit margin built into a deal that it will be worth your investment.
Besides crunching these numbers, you will also want to come up with a realistic timeline that includes deadlines for each major step of the project. This can help your project stay on track, but it also has an added benefit: staying organized can help you obtain financing for your investment. If a lender sees that you have a good deal with a solid potential return and a plan to get it done, you’re much more likely to be approved when applying for a loan.
Build a strong network
Having a network of real estate professionals on your side can be the one thing that gives you an edge in a competitive home market. Your real estate agent will be the most vital person you work with, since they can help you find the best deals for flipping and will help you sell your property for a good price once rehab is completed. You will also want to find a trusted contractor, ideally one that can provide you with examples of past work. Another good member to have on your team is an accountant or tax professional with experience in real estate. Operating a real estate business comes with many tax benefits and items that can be written off, so working with one of these professionals will be key in maximizing your returns.
Get your financing in order
Securing financing may not always be the easiest thing to do with a fix and flip project. Traditional lenders such as banks tend to shy away from rehab properties since they are viewed as too risky, and the 30-year timeline of such a loan doesn’t make sense for this type of project anyways. With short-term projects like home flips, you would be better off obtaining financing from a private lender that operates in the real estate space. These lenders often have loan programs specifically designed for home flipping, with a shorter loan term and funds to cover rehab costs on top of the acquisition of the property. A quality lender may even be able to provide you with resources to make your project go smoother. They can connect you with quality professionals or offer you access to tools and analytics that help you make the most of your fix and flip investment.
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.