A guide to effectively ‘fix and flip’ your property investment
Property investment is all about research, if you wish to come out the other end with a decent profit you must be familiar with the ins-and-outs of the process. There are several way to successfully invest in property, one of the most popular is known to the investment community as ‘house flipping’. This involves purchasing a property that is in need of repairs, renovating to raise the market value and then on-selling for a profit.
Flipping isn’t as straight forward as it seems, and the process is more difficult than it was just 5 years ago due to the recent economy storms.that said, flipping property can still be an effective strategy, but you must make sure you target only the most appropriate and/or attractive properties on which to execute this strategy. So to avoid getting into financial trouble, read the following guide to effective ‘fix and flip’ property investments.
Choosing The Property
When you start looking at properties be sure to take a clipboard to make any important notes about issues you may forget once you have returned home. Take note of everything from house size, layout, finishing, damage and landscape. This way you can gauge an estimation of renovations and forecast the financial side of the investment.
Note if the house has any unusual or odd characteristics. Occasionally there are homes that have poor layouts, for example avoid living areas that don’t receive sufficient sunlight and rooms that can only be reached via another room. These functionality issues occur commonly amongst older homes and today’s buyers will take notice as it’s an expensive job to fix. Just as important is the outside structure, look for any extensions that seem to stick out in a way that disrupts the flow of the original structure. If you find any of the above issues, it’s best to keep looking to avoid costly repairs and restructuring.
This doesn’t rule out buying a ‘unique’ home – quite the opposite actually! Even if the house is beautiful, you want it to have some unique characteristics that make it stand out from the rest on the street.
Location is one of the biggest considerations when it comes to property investment. Start your search in safe suburban zones. Besides the safety of your property while it sits untenanted, homes in high-crime areas sell for marginal profit and are difficult to get rid of. The worst house in the best street is the way to go – providing the home is structurally sound. Avoid investing in property that sits in busy industrial areas or behind freeways, these areas have a lower market value and can prove difficult to sell. Most will be used as rental or business properties, narrowing the market for resale. Properties that are close to local amenities like shops, doctors and schools reach a large target market.
This brings me to the next major point, target market – what is it? Ideally an investor will want to target starter homes as opposed to, say, 6 bedroom high-end properties. The reason is that you’ll have far more prospective buyers on a starter home compared to something more upscale. The more potential buyers you have interested, the quicker you will sell and make a profit!
Once an investor has found a property that ticks all the boxes, the next step is to have the home inspected. The land and house structure needs to be sound as repairs on this scale will leave you out of pocket with a property investment that has cost you money. Ensure you receive a written evaluation from the inspector to use if anything goes wrong down the track.
The idea of house flipping is to purchase a property that needs minor and quick renovations such as; new bench tops, carpet, paint and landscaping. If the property is purchased cheap enough, new kitchens and bathrooms make a real difference for on-sale too. Use reputable tradesmen for the major jobs and do the small things yourself, this will save money while still ensuring a professional job. Choose neutral, trendy colors and avoid buying expensive fittings.
Once the property has been landscaped and renovated it’s time to get it back on the market, try to do this during a market high if you can. Entrust the help of a good real estate agent, they will get the property advertised and prospective buyers looking immediately. Decide on a price that is slightly above the amount you are wanting so you have room to accept lower offers. All that is left to do now is wait for the buyer to seal the deal!
To sum it up, the best fix and flip properties are those that require simple renovations to achieve the maximum increase in market value – as well as buying for a large target market. By focusing on starter homes in good areas that are not economically obsolete, you can dramatically increase your odds of success. Happy buying!