http://zimmermanteamak.com/flipping-a-home/
There’s nothing more exciting than the prospect of purchasing a smoking deal, putting in a little bit of elbow grease, and flipping it for a significant profit!
After helping many buyers with this process, I can attest that real estate can be an excellent adventure. With that said, there’s also the possibility of picking a dud and getting oneself mired into a money pit.
I was talking to an investor the other day who said that overall, he’s done excellent with flipping homes, but has definitely had a few lemons that he wished he’d never laid eyes on.
Below are some helpful cautions and tips to make your investment a good experience!
1. Get set up on automatic notification of homes. Receiving updates of not only new listings, but sold/pending sales is key. This helps you to familiarize yourself with the market and what homes are selling for. I can set this up for you with two brackets: one showing how much fixer-uppers in your price range are selling for, and the other showing what “fixed up homes” (the finished product) with similar criteria are going for.
Notification of new homes is crucial for finding the best deal. Usually, if it is a really good deal, there will be other investors eying it, giving a good chance of multiple offers. Getting out there asap is key! You’ll also want to work with an agent who is willing to set up showings on short notice for something that looks like a hot deal. It’s key that both agent and buyer are willing and able to jump on a hot property.
2. Do your homework. During your initial viewing(s), be sure to make a good assessment of the different aspects of the home, and what work will need to be done. This is your preliminary homework. Depending on the outcome of the viewing, it’s good to work up a rough cost estimate, and run through a market analysis of what the home could sell for with your agent.
If this truly is a good deal, you will not want to take long at this stage. Assuming that the preliminary assessment looks good, the next step is to place an offer. It is important to note that you don’t need to do all of your homework upfront! Within the offer are provisions that allow you to further inspect the property, as well as perform any needed testing. Obviously you don’t want to write flippant offers on a property you’re not seriously interested in, but on the other hand you don’t want to make the mistake of trying to do ALL of your homework prior to writing an offer and missing out on a good deal. You’ll have the opportunity to fine-tune your research during the inspection period.
3. Be conservative and allow yourself a buffer. There’s always the unexpected. Don’t be overly optimistic in your projections! Make sure you have enough cushion to handle the unforeseen repairs, delays in work, and any extra time on the market in order to sell.
4. Lean towards conventional properties in conventional areas. Pretty simple concept. The more unconventional the house, the more undesirable the area, the higher chance you’ll be stuck with a bottomless money pit. This is not to say that unconventional aspects can’t be fixed and still make a profit on a case by case basis, but an odd home with an odd layout in an out of the way location is a recipe for a home that will suck more money out of your bank account and then sit on the market.
The ideal fixer upper is one that is mostly structurally sound with a workable layout on a decent lot in a reasonable commuter location, but that has cosmetic issues such as needed cleanup, paint, flooring, new porch, trimwork, etc.
5. Watch out for “lifespan” issues. Older homes with original septic systems, heating systems, roofing, and other features approaching the ends of their lifespans, can either cost you lots of extra money, or discourage potential buyers. If such systems have not been updated, it’s good to plan on potentially replacing them as part of your calculations.
6. Don’t over invest! Make sure that the upgrades you make are really a significant bonus, but that they’re not overkill for the home. While ¾ inch hardwood flooring and solid brass light fixtures might help a lower end home to sell, you probably won’t get your money back out of it. Too often I’ve met with sellers who didn’t get proper advice upfront and want to raise the price of their home way above the market price in order to cover all of their non-typical upgrades!
Hope these pointers have been helpful! Let me know if I can help you find a good investment property and give you the customized service you need!
Tait Zimmerman
“Your home sold in 90 days, or we’ll sell it for free!”
The Zimmerman Team/IEC Realty
www.ZimmermanTeamAK.com
907-373-7744
800-842-9187
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