3 Tips for Flipping a Fixer-Upper
Investing in real estate is a tried and true way to grow your wealth, and buying a fixer-upper can be a great way to get started. Unfortunately, this process isn’t always as smooth and simple as what you’ll see in house flipper shows on TV. Knowing how to find the right property—and what to do with it once you’ve bought it—can help you get the return you’d hoped for on your investment.
Here are a few more tips that can keep your renovations on the right track to maximize the return on your investment. Article by Karl Kennedy
#1: Thoroughly research the neighborhood and market before you invest.
When you live in a city, you get a sense of which areas are considered the most desirable. Remember, though, that’s based on the city’s history and not necessarily indicative of current and future trends.
This isn’t to say you should ignore popular opinion entirely, but you shouldn’t use this alone to gauge whether a property is a smart buy. Take some time to research how home prices in the area have changed over the past few years and which direction that value is going. If the neighborhood is at peak prices when you buy the property, that will affect the prices of fixer-upper properties in that area, too, so even a price that’s low compared to surrounding homes it may not actually be the best deal for a flipper.
Researching the market doesn’t just tell you whether a property is a smart investment, but it can also help to guide the types of renovations that will appeal to likely buyers. If the home is in a working-class neighborhood, for example, adding luxury upgrades might actually make it harder to sell, since the people who want (and can afford) those upgrades are likely looking for property in other parts of the city.
#2: Make the space as versatile as possible.
You might dream of a home with a modern home theater, but when you’re flipping a home you’re not designing it to your tastes. The goal is to give it broad appeal to likely buyers. For someone who doesn’t watch a lot of movies, a large, dark room with in-wall speakers feels like wasted space more than an appealing feature.
Again, it’s important to consider the neighborhood and the type of buyer you’ll be targeting. If you’re flipping a million-dollar mansion, setting up niche spaces can help the home feel more move-in ready (and the buyers can likely afford to do their own renovations after they move in if they don’t like them). For most single-family homes, though, keeping extra rooms all-purpose with your renovations and staging is the smarter move.
#3: Budget before you buy.
The initial purchase of the property is just part of the costs involved in flipping the home. You also need to factor in the cost of necessary renovations. A property selling for $50,000 may not be the deal you think it is if it has foundation issues or needs a new roof, either of which will cost $20,000 or more to fully address once everything is said and done.
Experienced house flippers have a general sense of which repairs cost the most and roughly what they’ll spend to make them. As a beginner, though, it’s crucial to do your research. Know which types of upgrades you’re qualified to DIY and which will require a contractor. Even if you’ve waived the inspection contingency, you should still walk through the home with an inspector who can point out critical issues an inexperienced flipper may not notice. Once you have that knowledge, get quotes from local contractors to find out what those improvements will cost in the current market.
It can often feel like you’re racing the clock when you’re looking for property. Especially in cities with a hot real estate market, many flippers fear they’ll miss out on a deal if they take the time to get an inspection and budget before purchasing. Remember, though—once you’ve bought the home, you can’t take it back. Corporate investors with deep pockets can afford to roll the dice on a potential money-sink, but an independent flipper who’s just starting out needs to be more selective and avoid these bad investments. The best way to do that is to know the financial details before you spend any money.
The Bottom Line
Flipping homes can be very lucrative, but not every low-priced fixer-upper is a gold mine waiting to be discovered. Making smart choices with your purchase and renovations will help you get the return you were hoping for on your investment properties.
|CLAIM YOUR FREE COPY OF THIS HOME IMPROVEMENT BOOK.|
Renovations, no matter how small, add value to your life by making you happy with your home, and they add value to your property, as well. If you choose to relocate, Brian Parker offers expert advice on selling in Parker, CO.
Real estate pro Brian Chandler of RE/MAX Alliance Group is a top producer and sales trainer located in the Parker, Colorado, area. Whether you’re buying or selling, team up with Brian today! 720.808.1007 What is it like Living In Parker Colorado? Read more articles like these Top Realtor Info Contact Brian Chandler