The Critical Five Elements to Flipping Real Estate
When done right, flipping real estate can be a lucrative venture. The prospects of being a successful house flipper are good for individuals with the vision and determination to make it happen. It also helps to have some business sense in the real estate market. The following aspects can help you take up the challenge of flipping real estate and get positive results.
Purchase Price
Like any other real estate transaction, the starting point for buying rehab property is its purchase price. This aspect can make or break a deal. A low purchase price increases your prospects of making a profit when you sell. As an investor, you’ll need to set a reasonable budget for purchasing a rehab, giving yourself sufficient financial leeway to invest in repairs that will pay off in future sales. Your purchase price will affect every other aspect of your project.
Cost of Home Repairs
Before upgrading a rehab, determine what home improvements will add the greatest value to the property, taking into consideration the state of the house, its location, buyer potential and market value in the area. Inspect the property with your contractor and make a list of improvements most likely to increase home value and market appeal. Once you agree on upgrades, ask your contractor to provide you with a written estimate of repairs to include materials, labor and time frame to complete the project. This data is essential to assessing the property’s “after repair” value.
“After Repair” Value
Flipping real estate isn’t an exact science where you can predict with certainty sales profits. By evaluating the market in advance, you can get a better idea of property values in different areas and what attracts prospective buyers. Using this information, you can estimate what your rehab could sell for once home upgrades have been completed. Studying the market gives you a better chance of making wise rehab purchases that will get you favorable flipping results.
Budget for Repairs
Keeping repair costs within your contractor’s estimate is paramount to success in flipping real estate. This requires that you stay abreast of repair expenses and ensure your contractor stays on schedule in getting the job done. Be sure to set a realistic repair budget from the start as unexpected expenses here and there could reduce your bottom line. Equally as important is adhering to the tasks and budget you’ve agreed on and not go off on tangents that seem good but aren’t essential to the final product.
Price Listing
After putting so much time and effort on a rehab, you may be tempted to set an unrealistic price that reflects your “blood, sweat and tears.” Don’t. Buyers are only interested in the finished product and how it compares with other listings in the area. An inflated price will only keep your house on the market longer. In contrast, the right price could produce immediate results. By pricing your house appropriately and showcasing it in its best possible light, you stand a better chance of getting the results you desire.
By putting these aspects into practice, you’re more likely to make your venture of flipping real estate be a success.