The fix-and-flip strategy is a great way to earn some cash—in fact, it is favored by many experienced investors. However, if you are brand new to the property investment scene, there are plenty of things that could go wrong.
For the first time investors, fix-and-flip is a tactic where the property is purchased, rehabilitated, or renovated, and then sold at a profit. Finding a dilapidated house, fixing it up, and turning it around is a great way to earn money especially since these properties are priced to sell. However, there are still some things to keep in mind for your fix-and-flip. Here are six of them:
Understand Your Market
Knowing your market is crucial to making sure your investment is a success. Analyze the location of the property and think about the type of buyers it would attract. This will also help you understand the risks that come with investing in that specific property and give you insight on the right time to invest in it.
Forecast Your Financing
Creating a budget and sticking to it is one of the most basic and important tenets of investing. This will help you spend prudently and wisely, as overspending can quickly land you into hot water. If a property is especially attractive to you but is just over your budget, train your eyes elsewhere—there are plenty of properties dying for a fix that is perfect for your budget.
Invest in Property Insurance
After buying a property to see wide returns on your investment, you would want to make sure it is protected at all costs—and that is most efficiently done through property insurance. This protects you in case of unexpected events or catastrophes, like floods, damages caused by a storm, or fire accidents. This provides some modicum of comfort and reliability when flipping your property, as this can be risky.
Look at Neighboring Properties
Even if you have fixed and flipped the property into the most gorgeous one on the block, buyers may not be so interested if neighboring properties are shabby and in disrepair. The state of nearby properties will affect the people who frequent the area and, in turn, the kind of buyer you get. Before fully diving into a property, make sure to accurately assess its locality and surrounding structures.
Vet Contractors Thoroughly
Professional and well-trained contractors are crucial to the success of your project. Even though the process may be time consuming, thoroughly vetting your contractor will save you a lot of time, money, and headache from an otherwise unskilled and unsatisfactory one. Be sure to look at their prior projects, read reviews, and ask about their certifications and licenses. Your contractor will oversee assets worth thousands of dollars, so you will want to make sure they are in trustworthy hands.
Remember the 70% Rule
This is a good guideline to keep in mind when fixing and flipping properties. This rule states that you keep away from buying a property that is worth more than your after-repair value (ARV)—after all, this will not get you the profit you have been hoping for. If you multiply your ARV by 0.7, then subtract the amount you have spent on repair from it, that should serve as the minimum purchase price. Some veteran fix-and-flip investors ignore the rule, but if you are a novice, the rule will make sure you do not get burned by your first fix-and-flip endeavor.
Getting Your Fix-and-Flip Loans with Shannon Christenot
Fixing and flipping properties can be exciting with all the possibilities involved, but you will need to fully understand the costs behind it. By working with a mortgage broker, you will find the best deals to fund your thrilling new project while keeping these important tips in mind!
Looking for the best mortgage company in Los Angeles? Get in touch with us at Shannon Christenot! We can help you get the best rates for your fix-and-flip loans. Get your free mortgage rate quote today by visiting our website or calling us at (818) 601-2231!