What are the fundamentals of doing your first investment house flip?
Preparing for your first flip can be difficult, here are 4 tips to get you started:
Buy Low From Off-Market Sources
Determine your maximum budget, taking into account rehab costs and holding costs. A general rule is to evaluate the deal using the 70% rule for house flipping, which will help you determine the maximum you to pay for your potential flip.
Avoid Low-Priced Money Pits
Look for opportunities that won’t sink your budget in the rehab portion of the process. Get the property inspected and estimate your rehab construction costs totally, to make sure that a bargain property really is as good as it looks. Pick flips with reasonable rehab costs, even if there’s a lower profit margin.
Your first flip doesn’t need to be HGTV-worthy. Select a small, manageable project that you can learn from. Mistakes will happen – even with experienced flippers – and prepare you for bigger projects. Your early budget will be better protected this way, too.
Don’t Make Unnecessary Improvements
A property improved too much might be too expensive for its area. Flip a house at the best possible cost for its neighborhood, considering similar properties. Over-improving the property could lead to failure to recoup your investment. To avoid this diligently study the features of comparables.
Firstly, understand your market. Get inside homes for sale within 1 mile of your target. Only the 3 highest value will be shopped and sold in 30–45 days.
Determine your flip’s value. Stay within a budget and land in your top 3 comps while making a return and you’ll be more likely to make money.
Lastly, buy low and sell high in as short a timeframe as possible.
Markets constantly change and you will always working on the above. Aim for 4–6 per year and always try to make a better profit on each project. Don’t hold or put more money into a property to get more lookers - best to unload and moving on. Keep moving and be efficient, your profits will increase. Good luck!
It is essential to know your market.
Then put together your game plan.
You need to have many exit strategies. If you don’t sell by week 2-4, what’s next? Price drop, extra add on? If you don’t sell week 4-8, what’s next? Sell to an investor, keep it, severe price drop?
And always take into consideration what you need to charge if you keep it and rent it out.