The one thing that home buying and property investment projects have in common is the amount of preparation you have to do to make sure your experience is a successful one. Being prepared and informed about what it takes to flip your first house is the first step to a prosperous project. Everyone has their first flip, even large contracting companies once had their first flip, so don’t be intimidated. While there may be some unexpected bumps along the way, if you do your research and preparation, there is no reason you’re investment shouldn’t bring you a return. Follow these best practices to be on your way to finding the right investment for you.
1. There are still so many distressed properties on the market to snatch up despite the market’s recent boost. You can take advantage of that, by finding the potential in the homes you’re looking at as investment prospects. You can find these neglected properties either through auction, or a relationship with a local real estate agent. You as the investor should be excited when seeing outdated kitchens or worn out carpet as an obvious improvement that will get you a return. It’s important to get these homes inspected as there could be major underlying problems that may cost you more than you’ll make. It is also important to understand and respect what’s within your scope to improve. If you have a good relationship with a contractor, or have DIY skills yourself, it’s important to know whether or not you’re up for an entire gutting of a home, or if just want to handle the updating of things like cabinets and flooring.
2. Do the numbers and then do them again. There is only money to be made in your investment if the after repair costs in addition to the purchase price is less than the resale value. Being solid in knowing what your repair costs will amount to is imperative. A real estate agent who knows the market and what similar properties in the area have sold for is helpful in calculating the after repair value (ARV). It is important to build some wiggle room in your budget for unexpected costs, and it’s best for first time flippers to avoid speculation. Stick to the numbers and you’re more likely to have a return that you expect.
3. Don’t be afraid to call in a professional. This is along the lines of knowing what’s within your scope to repair. Lots of first time flippers have a good understanding either from personal home renovations or from DIY television shows about profitable cosmetic improvements, but look past the technical aspects of a home. Plumbing repairs, roofing issues, water damage repairs are all improvements that can be costly. Trying to learn a trade as you go, like electrical, can end up costing you more time and money than hiring a professional. Make sure you get assessments and bids from multiple contractors. A real estate agent that is familiar with property investments can usually recommend lots of qualified contractors that they’ve worked with before.
4. Design your home for resale, not for your taste. Stay conservative with your colors and hardware choices. Buying the flashiest accessories might make your home stand out, but not in a good way. Look at what appeals to the surrounding neighborhood and target your market. Features such as crown molding, hardwood floors versus carpeting or a kitchen island are all things that can appeal to buyers. The goal is to sell your beautifully refinished home fast. Including things that appeal to a greater audience can achieve that.
As long as you’re practical and diligent in your investment, there’s no reason you’ll get in over your head on your first flip. The main keys are to stick to the numbers and what you know. There’s no reason you should try to skimp on renovations by doing everything yourself. Spending that little bit of money by getting the job done right the first time will not only save you stress, but you’ll see it in your return. After all, that’s the name of the game when it comes to property investment.
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