Some things may be broken, but it can still be mended…such as a house.
A person does not simply demolish a place where good and challenging memories reside. In times of need to change a house or to abandon it, most people prefer to sell the property to others rather than bringing it down.
According to a study conducted by the ATTOM Data Solutions, a total of 245, 864 single-family homes in the United States were flipped in 2019, which is up by 2 % from 2018. It shows that home flipping rates and related activities continue to rise, making fix-and-flip one of the most well-known real estate investing strategies to date.
The Fix-and-Flip Strategy
Homebuyers commonly want to buy a house where they can move in at the earliest possible time. Flipping a house is an effective strategy to meet the client’s demand and to win deals. Fix-and-flip is the method of purchasing a property, fixing it through renovation and repairs, then selling it for a more valuable price. It is highly-suitable in houses of range conditions, whether distressed or slightly used.
Here are the 5 easy steps in flipping houses:
Step 1: Find the property
In flipping a house, the first thing you need to do is to find the property that has good potential investment. The following are the common sources that can help you in finding deals:
- For sale by owner
- Real Estate Owned (REO)
- Off-market leads such as those you can find in pre-foreclosures, appointment of substitute trustee, tax delinquencies, probate, divorce, absentee owners, senior citizens looking to downsize, vacant properties, evictions and more.
In Real estate IQ, we can provide you with 45,000+ leads every month! Feel free to check our Deal Finding Suite where we offer a list of motivated and distressed sellers!
Step 2: Analyze the property
Analyzing the property is necessary to assess whether the subject property can give you a good return on investment. When you do not give priority in analyzing a deal, you may even end up at a loss instead of earning a good return. The following are simple guidelines that you can follow in analyzing the property:
Determine After Repair Value
The After Repair Value (ARV) refers to the value of the subject property after the flipping process. In getting the ARV, you can use comps or hire services of a property appraiser.
Estimate the Rehab Costs
Experience is the best mentor in learning how to estimate rehab costs. If you are just getting started in flipping houses, you need to explore the strategy until you become comfortable and more confident in doing it on your own.
If you are just getting started to the real estate community, there is no need to worry. You may join our Community and learn from our team of experienced investors!
Calculate the ROI.
You need to calculate the estimated return on investment because this process will help you set a good offer. Also, calculating the ROI will assist you in allocating budget for the repairs and cost of fixing the subject property.
Step 3: Determine the maximum offer
Your maximum offer must be based on the factors previously discussed such as the repair cost, After Repair Value (ARV), the estimated ROI and other underlying factors.
Step 4: Fix the Property
After following the previous guide steps, the next thing is to fix the necessary repairs for the property, which includes finding the right contractors to do the repairs. You can get contractors from referrals, social media, networking, and research or from Talking to People (TTP). You also need to get the necessary permits to manage the contractor’s fee and your expenses. You may overspend if you will not manage and assess the rehab process. As such, being mindful of the result of your property analysis is important so that you may not overspend.
Step 5: Sell the property
The property is now up for sale after the flipping process. You must find the buyer, make an offer, negotiate and close the deal.
In Real Estate IQ, we can provide you with 45,000+ leads every month! Feel free to check our Deal Finding Suite where we offer a list of motivated and distressed sellers!
These 5 easy steps may help you get started in flipping houses. You may start doing it and see how you can make new stories out of an old house.
For more resources and articles, feel free to read our investment blogs here.
Joseph James is the founder and President of www.roimuse.com, a company that provides Systems, Tools and Training for Real Estate Agents and Investors. He is a well-experienced real estate investor and trainer for single family, multifamily, and commercial real estate investments. He is also the Commercial Advisor of Real Estate IQ and the Director for Commercial Group in the year 2020
The blog articles are intended for educational and informational purposes only. Nothing in the content is intended as legal or financial advice.