The key to success in the flipping industry is choosing the right house. Not every house is good for flipping. While any house can be good at the right price on the front end, what’s more important is your return on investment. What good is buying a house at a rock-bottom price if you can only make a small profit?
Successful flippers are very selective when it comes to choosing which home to invest in and which one to let go. Here are all the factors to consider when looking for a potential house flip.
Size Matters
When flipping a home, there are several details to consider. Ideally you want to choose a home that is smaller than 2,000 square feet. Under 1600 square feet is preferable, but not a must.
Buying a large flip home can be costly. You may find that you must invest much more than you budgeted to make the home not only livable, but attractive to potential buyers.
The basic premise in flipping is that after the kitchen and bathroom, everything else has diminishing returns. Flipping a large home is going to be more costly in the long run, as there are more rooms to renovate.
Most flippers find that it’s easier to sell homes that have 4-bedrooms or less. The preferable sized home is 3-bedrooms and 2-bathrooms. Anything bigger may not make a worthwhile profit.
Location, Location, Location
Location is something that a well-seasoned flipper can’t stress enough. Finding a home that’s in a desirable neighborhood, or an up-and-coming neighborhood, is a must. You can spend thousands renovating a home, but you can’t renovate the neighborhood.
Before buying a potential flip, research the area. Pay close attention to details such as:
· Employment growth
· Projected rising house prices
· Rising real estate sales
Avoid areas that have several homes for sale. This may be a sign that neighbors are moving due to overdevelopment or crime.
Buying a home in a relatively decent area can score you big points when its time to list the home. Prospective buyers want to purchase a home that is not only fully renovated, but in a location that supports their life goals.
Look at the Lot
Considering buying a flip home that sits on a hillside? There are pros and cons. In some instances, a hillside home spells trouble. Homes that sit on a slope are more likely to have a variety of structural issues, including:
· Cracked foundation
· Crumbling concrete
· Uneven floors
· Warped ceilings
Fixing up a home that has major structural issues can cost you major dollars.
At the same time, if you have the right construction company that can address structural issues, you may be able to get a great deal. Sellers and lenders are often willing to sell at a reduced price if the home needs serious repair.
Avoid Livable Homes
When looking at a potential flip home, put on your buyer hat and look at the condition of the home. Is it pretty livable and maybe just in need of minor updates? If so, you’ll want to pass.
As an investor, you want to buy properties that need some serious elbow grease. Buying a livable home isn’t smart for your bottom line. Why purchase a home that’s in decent condition if you plan to rip out and replace everything?
Go for homes that aren’t livable without major renovations.
Find a Home That’s Already Demoed
Sometimes homes are listed after they have been demoed. This means that most of the hard work has already been done. All that’s left to do is to replace missing appliances, choose new fixtures, and so on.
Buying a home that’s already demoed can also save you time. With a high-quality construction contractor, you can finish the flip and have the home back on the market in a matter of weeks.
Buy Off Market
Off-market listings are for sale, but you won't find these properties listed on Zillow or Redfin. Because these homes aren't advertised on MLS or similar portals, the only way to buy them is through a broker or word of mouth.
There are also companies, such as Hawthorne Holdings, that specialize in finding special hidden house deals. The best part is that these properties typically sell anywhere from 30-50% off the market value.
Buying off market can save you tens of thousands of dollars. There’s also much less competition, which makes it easier to add investment properties to your portfolio.
Buy From an Agent Who Knows Investment Property
Qualified real estate agents are not only familiar with properties listed on the MLS but should also be savvy enough to find off-market deals. To get ahead of any competition, contact a realtor who serves the area that you wish to purchase in. Agents are often privy to which properties are hitting the market soon.
It’s also important to work with a real estate agent that knows investment property. The agents at Working Moms Realty know what property investors look for and can keep you in the loop when potential flips are due to be listed.
Hire a Reputable General Contractor
As a real estate investor, chances are that you don’t have the skills or time to complete renovations on your own. DIY only saves you money if you know what you’re doing. Otherwise, you’ll find that you’re in over your head and running out of time.
Hiring a dependable general contractor is a must. This is someone who will manage the renovation project from start to finish. GCs will hire subcontractors as needed to ensure that the work gets done on time.
Though expensive, the right general contractor is worth their weight in gold. A GC will help you avoid costly renovation mistakes while also offering significant tie savings. The quicker the house is renovated, the faster you can put it up for sale.
If you’re looking for a reputable general contractor in Tennessee, choose Larossa LLC. We take care of all the decisions, giving all our clients total peace of mind.
Looking to flip a home? Contact us to discuss your project needs.