We have all probably seen at least one episode of Fixer Upper on HGTV. At some point, we have all thought about how hard it could potentially be to buy an investment property, renovate it, then sell it for profit or keep it as a potential rental property. But what should you research before purchasing a flip project? The pros may make it look simple, but buying your first flip project could become a massive mistake if you are not prepared for what goes into it.
Finding Properties
If it’s your first time getting into the industry, finding a property can be challenging. Try finding a real estate wholesaler; these agents will do all of the hard work for you when searching the market for properties that are specifically for property investors or flippers that want to capitalize on the investment that you are making. You should be prepared with what kind of budget you are willing to spend on said fixer-upper. Many investors will want to look at hard money loans when it comes to purchasing a rehab home. This is because these types of loans are designed specifically for investment properties. These types of loans are based on factors that go far beyond just your credit score. The banks will look at things such as profit potential, and they will often close faster than your typical home loan and help to allow the investors to leverage more funds for multiple flip projects.
Estimating Rehab Costs
Estimating your rehab costs is often one of the most challenging and crucial parts of renovating an investment property. If you don’t give yourself enough room when you estimate cost, this could mean a potential loss in profit; however, if you estimate your prices too high, another investor may come in and steal the property out from under you. Try creating a quick cost analysis to help you calculate what your budget should be for renovations. This should help to keep you from estimating either too high or too low.
Don’t Bite Off More Than You Can Chew
If you have ever tried to push a 100-pound boulder uphill, you will find that it is a never-ending struggle. This can be the same if you take on a more significant project than what you are prepared for when purchasing an investment property. Some rehab projects can often fishtail out of control, and you can find yourself in a ditch that you cannot get out of. Make sure that when you choose your renovation project that you are working smarter, not harder. Talk with someone who has had the experience of working on rehab projects and finding out what they did to make their rehab project successful. They will often understand your strategic mindset and help you to find an exit strategy.
When you invest in a fixer-upper, it can be challenging but be tremendously rewarding in the end. Don’t think your project will be finished within a short turn around the property? Make sure you have a realistic time frame, and with patience and a little bit of time, you can rehab a home into something that others will love and help you turn a good profit.