What’s Your Fix and Flip Strategy?
Flipping houses for profit sounds like such an easy way to make money. Just grab up those underpriced gems that come on the market daily, make a few repairs or improvements and sell them to desperate buyers willing to pay premium prices for the right home. In theory, fix and flip is a simple concept of buying low and selling high, but the complexities of the real estate market make it necessary for would-be flippers to spend adequate time formulating a plan for success.
The first thing someone considering flipping houses must decide is usually whether they plan on doing the remodeling themselves or hiring a professional contractor. Former experience with the building trades typically determines the level of comfort for performing building jobs. Dividing the jobs to be completed by difficulty can help determine which ones require an expert skill level. Many improvements do not require special skills. The successful fix and flip investor can help increase the profit on the final deal by saving as much money as possible up front by tackling jobs like cleaning, painting and landscaping.
When approaching a potential property with the intent to purchase, a prudent house flipper will normally first decide if the house will require major or minor repairs. In some cases, a house is so damaged structurally that the cost to repair it would exceed any profit selling the home at fair market value would earn for the fix and flip investor. In other examples, houses for sale only require minor repairs and cosmetic fixes. Learning to tell the difference, or being willing to hire someone who can, often makes the difference in whether the deal will go well or not.
Finally, the investor should determine how easy the house will sell. When sellers in the neighborhood are experiencing long wait times to sell and having to reduce sale prices, the condition is said to be a buyers’ market. When people are moving to an area and buying homes at the asking price, it is a sellers’ market. The fix and flip speculator can learn to make money by understanding and staying on top of real estate cycles. Learning to discern the recurring patterns of the real estate market enables investors to time their buying and selling. By buying homes when the market is experiencing a downturn, efficiently handling DIY and professionally contracted repairs and improvements and selling when the trend turns hot, prudent investors can turn a fair profit in a short time period.