Beyond the Basics: Rehabbing and Flipping Properties.

Beyond the Basics: Rehabbing and Flipping Properties.

The goal with every rehab is to complete it as quickly as possible while keeping it on budget and not compromising quality. Each project is different depending on the scope and magnitude of the project but with each project, you need a timeline for the order of completing each aspect of the rehab. Careful planning is required to avoid overlapping contractors or doing work out of sequence causing more work later. The goal is to have as many things as possible going at once that don’t affect each other.

The second most popular saying in real estate, right behind “Location, location, location” is, “You make your money when you buy, not when you sell.” Finding the right house to flip is essential. For most flippers, that means a house that is structurally sound and just needs some cosmetic updates.

Can you still flip houses in high end areas and make money? Well that depends on your level of risk tolerance, experience, knowledge, time, and cash.

One things for sure, if you don't know your numbers, your house flipping career will be short, and very painful. The good news is, if you are in the flipping house business, you don't have to understand complex mathematical formulas, have a PhD, or possess the intelligence level of a physicists. When it comes to the math side of things, there are some common formulas in house flipping that you really should understand inside and out before you get into the business.

When it comes to flipping properties successfully, a little bit of knowledge can go an awfully long way. You want to be able to hedge your bets as well as possible to ensure the greatest return on your initial investment, so you should never go into a transaction without having a good idea about everything that you need to know in relation to the property you are aiming to purchase.

There are many things that you should know before you try flipping for yourself, so here are the basics.

Your Own Budget

It's your money that is going to be invested into the property, so you should know exactly how much you are willing and able to spend before you ever even think about making a purchase. Create a budget plan and stick to it. Too much deviation and you may find that the investment that you thought would reap huge rewards ends up becoming a sinkhole into which you simply throw your cash away.

Where To Look

Estate agents can help you when it comes to flipping properties, particularly if they specialize in locating foreclosed homes. What you are aiming to purchase is a property that has potential and is being sold for less than the market value. As such, you should try speaking with banks to see if they have a list of properties on their database and search out specialized estate agents, rather than ones that will try to sell you properties that don't need any work doing.

The Right Workers

Nobody is an island when it comes to flipping houses and it is practically guaranteed that you won't have all of the skills that you need to do it on your own. As such, you need to gather a team of people below you who can do the jobs that you need doing in a cost-effective manner and to a high level of quality. In some cases this will often be a trial and error procedure, but if you can get good word of mouth from people who have used the workers before then you are off to a good start.

The Location

The location a property is in can make a large difference when it comes time to setting a price for it. A house that may look like a steal on the surface could show its true colors if it is located somewhere that nobody wants to live in. Look up crime statistics and local amenities before making a purchase so you have something beyond the house itself to offer buyers.

The Property

Wherever possible you should never go into a property purchase blind, particularly if you are aiming to fix a home up. Always have a good idea of what needs to be done so that you can budget accordingly and plan the work out properly. Try to have a house inspector look over the property and have them highlight any issues that could hold up the work or lead to you losing money in the investment. There's an initial cost involved in this, but you will be thankful if they reveal issues that leads to a property getting scratched off your list.

A very positive development expanded the "sweet spot" of the fix & flip market. With home sales over $200K now representing over 60% of the resale market, fix & flip investors are successfully moving up the price scale. It is safe to say that investors are now aggressively pursuing basic rehabs up to $300K and beyond as sales over $300 represent nearly 30% of the resale market.

People who invest in rehabs over $300K and beyond market segment should do so carefully. While you can't predict price with any certainty, indicators on pricing will stay the same or drop slightly in the fall. If this is accurate, then more care must be taken when purchasing a property to be rehabbed over the next few months-any price deterioration will have a negative impact on the investor's profit margin.