5 Easy Steps to Fix and Flip Homes
Updated: May 4, 2022
5 Easy Steps to Fix and Flip Homes
Have you ever looked at an abandoned and dilapidated house in your neighborhood and thought, I could fix that up and sell it to a family looking for their dream home at a clean profit?
Home flipping is an investment strategy where an investor buys an abandoned or run-down home at a discounted price and renovates it to sell at a decent profit. This article contains 5 easy steps to fix and flip homes.
The first step to a fix and flip is to research the market of the community where you desire to carry out the fix and flip business. Some factors to consider are:
Understand their local real estate market for a successful fix and flip investment.
Be able to recognize a good property and estimate how much it can be sold after renovation.
Understand the renovating process and requirements including the costs, duration of the project, etc.
Have a solid team of trusted contractors and realtors.
#2. Find a Property
The next step is to find a property in a good neighborhood that will attract buyers once renovations are done. Ensure you get a property that can also yield more return on investment.
You can either find a property using a real estate agent or you can do the searching yourself.
Either way, ensure that you consider the factors affecting the property appropriately such as the location, benefits of the property, risks with the property, estimated cost of rehab, the after repair value (APV), and calculated return on investment.
#3. Obtain Financing
The last thing you would want to hear after finding a property is, “great, your offer has been approved but how do you intend to come up with the money to finance the investment?"
Even if you have little or no money you can still invest in real estate.
Before you ever make an offer, ensure you have a lender who will finance your project. There are three options available for obtaining funding which include: private money lenders, traditional loans, and alternative methods like crowdsourcing.
#4. Purchase the Property and Start Renovation
After your offer is accepted and the transaction has been made, ensure you have the necessary permits before you start renovating.
The next thing is to fix the necessary repairs to the property which includes finding the right and well-experienced contractors with a portfolio of past work similar to yours.
Call them to check out the contract-related items such as budget, overall quality of their work, deadlines, etc.
Get them to commence work the same day you settle on the property because as days go by, you're paying interest, taxes, utilities, and other costs of owning that property.
In other words, you'll lose a lot of money. So the faster you get the renovation project completed, the faster you can sell the property and repay your loan.
During this flipping stage, your job is to ensure the project stays within the deadline and does not go over budget.
#5. Sell the Property For a Profit
After the work and renovations are completed, the next thing which is the final step is selling the property. This can be done through your realtor especially if it's your first time.
The goal of a fix and flip investment is selling the property for a profit. This positive return ensures that you're in a good position to purchase another property immediately after the first one is sold out and repeat the process.
Undergoing the process of fixing and flipping a home can be stressful and tiresome especially if you're a beginner real estate investor.
You can lean on the experience of other experts (from your researcher to your lender to your contractor to your realtor) to avoid mistakes.
Finally, flipping homes requires teamwork so keep on building your network of professionals.