The Art of Fix 'n Flips - Step 1 - Purchasing the Right Property

Moving on with your weekly topic, we shall cover the first part of the Fix 'n Flip.

I forgot to mention, however, that prior to even purchasing the right property, you have to pinpoint your market area and determine your strike prices and profit margins.  Typical investors today are happy with 12-25% profits per flip.  As in any type of investing, the higher the profit you desire the more risk you will take on.

Here is the usual breakdown:

Newer, and often pricier homes have been seeing smaller returns.  The upside to this, however, is that they require minimal remodeling (although I have seen some rather new tear-downs) and can sell pretty quickly.  The downside is that average profits are between 10-18% per flip.

Older homes can sometimes score home runs.  They can also, however, cause nightmares.  Prior to purchasing you have to check the roof, foundations, tenants, fencing, and area in alot of detail. Some homes can be quite affordable but located in an area which you will have difficulty selling (although anything sells at the right price).  The upside to older homes is that there are more of them, the purchase price is much lower, and with proper research the profits can be great (i've seen as high as 35% on some great deals!).

There are several purchasing locations.  The one everyone is familiar with, of course, is the MLS.  The good deals are usually the bank owned homes or short sales.  Bank owned homes can close quickly but have alot of competition from other investors.  You will have to work with a great real estate team to be able to locate them and contracted very quickly. Good thing with them, however, is the fact that you receive title insurance, clear of liens, and have inspection period to make sure the home is the right fit.  You get the same benefits going the short sale route, but bank approvals can range as long as 6 months on these (enough time to do 1-2 deals).

Another route is purchasing property at the foreclosure auctions.  There is incredible risk in doing this and investor MUST verify details and what team he is working with.  You can come across special hidden liens, tax liens, utility liens, child support liens, and unexpected surprises such as roof/foundation repairs which are hard to quickly inspect.  Many times properties purchased at the auction today are owner or tenant occupied and you will need to either do a cash-4-keys or eviction before you begin the rehab work.

We work all 3 acquisition routes and have seen success with each.  Every investor, however, needs to determine his comfort level.  It is a very stressful road and requires a strong heart.  I will be glad to answer any additional questions you may have.  E-mail me at max@teamhybridre.com.