What Makes a Property a Good Candidate to Flip?
Flipping houses is becoming increasingly popular. Unfortunately, the popularity of the idea is creating a bit of competition among those who would love to try it out for the first time. The increased competition often serves to drive up the costs involved in purchasing the profit, which only manages to lower the profit potential. However if you find a good deal and feel that the property is a good candidate for a flip you can ask yourself the following questions to help you determine whether or not the property really is a good candidate.
1) Have you had a qualified inspection and determined that there are only minor repairs that need to be made to the property and the landscaping? This is important because every repair that needs to be made will eat into your budget. You want to complete the project with as little extra money invested as possible in order to get the greatest return on your real estate investment possible.
2) Is the property suitable for the neighborhood? By this I mean is the property a three-bedroom house build for families in the middle of a retirement community or is it a one bedroom, cottage-style home in the midst of family houses? These aren’t exactly a good match and can cause problems when it comes time to sell.
3) Can the neighborhood bear the price you need to bring in from the flip? If you are creating an upscale home in a marginal neighborhood you are almost guaranteeing a loss on your investment. You want to find a house in need of repairs selling cheap in a neighborhood of much better houses so that it can bring in the profit you are hoping to get when all is said and done.
4) Can you make the changes you envision for the house on your budget and without significantly changing the structure of the house? This is a biggie and one that often gets overlooked. You do not want to start knocking out walls or creating additions when flipping a house. That is something you should leave for the new owners. You want to make as few waves as possible and only make changes that will improve the value of the home.
5) Can you improve the value of the home enough to make it worth your while in a short amount of time? This is another big deal when it comes to a house flip. It takes time and money to make the changes that most “flippers” have in mind for their investment, especially first time flippers. Do you have the time to stick with it and the money to cover the carrying costs while you are in the process of making the changes?
6) Is the property in a high demand neighborhood, city, etc. for selling properties? Another common mistake is buying in areas that are hard sells for buyers. It is often quite simple to find lower priced properties that are attractive at first glance however; if you can’t sell the property you purchase to flip it really defeats the purpose of putting all that time, effort, and money into making the improvements.
7) Can you do the work or will you need professionals and if so, will it still be cost effective? Be careful that you do not overestimate your abilities in this if possible. It is great to think you can put down a hardwood floor but the reality of doing it is quite another matter. Be sure you have a realistic understanding of the potential costs involved in the flip and whether or not the property will still be profitable in the worst-case scenario.
Answer these questions when checking out potential real estate investment and house flipping properties and you should be well on your way to a successful flip, at least as far as the selection of the property goes. You should also find a house to flip that you like as you will likely be spending a great deal of time there.