Fix-and-flip investors will say this aspect of the real estate industry is a no-brainer. Everybody wins:
- Sellers win when buyers take distressed properties off their hands.
- Investors win when they buy low.
- Buyers win when investors sell low.
Flipping can be lucrative if you know what you’re doing, but it can also be risky business. Be patient. It comes with downsides you need to be aware of before you jump into the first deal.
Here are 3 ways to avoid a flip flop:
Know What You’re Looking For
The first action you take as an investor is to look for properties you will be able to buy at a low price. Know what you’re looking for and walk away from everything else. If you’re planning to flip, these will usually be distressed properties or homes requiring a little TLC.
Distressed properties can fall anywhere on the spectrum, and it’s good to know how far you’re willing to go. If you’re only looking for light fixer-uppers you’ll pay a little more but there will be less effort and stress required on the back end. You’ll also have less revenue potential than you would with a property that is either badly deteriorated or even condemned. It’s up to you to set your priorities.
Finesse the Fix
The next action you take with a flip is the fix. If you or your partner are a contractor or relatively handy, you might do the rehab work you. If not you’ll have to hire someone. Home repairs can be expensive. But there are ways to finesse the fix.
If you need to hire a contractor, be sure to look for someone you trust. Be sure you get a realistic estimate of the budget you’ll need to make the repairs. Time is literally money, so work quickly yet efficiently. Once you own the property, interest payments accumulate while the property is being rehabbed.
Perform Due Diligence
Although you want to get things done quickly, don’t skip steps or try to rush. There are often unforeseen complications, such as zoning or permit complications to gas, electrical, or septic problems. Performing due diligence means learning everything you can about the property before you buy it. This can help you sidestep certain issues, but always include room for unanticipated issues in your budget. Make sure renovations are done with the proper permits and paperwork; otherwise, you may have trouble selling it later.
These 3 steps and other training will help you avoid with flip flops. They are certainly no fun, and worse than that can end up costing a lot of money you hadn’t planned for.