To Flip or Not to Flip: Things to Consider When Flipping a Home for Profit
There are many way to make money on a real estate investment. With the large amount of property types to choose from, the possibilities are expansive. Each property requires a different strategy, so understanding the best option for you is vital to your investment.
Costs to Consider
When purchasing a house that you intend to flip, it’s important to examine every aspect of the house that you will need to put money into. The best way to do this is to start with the end result in mind. You need to start with your ARV (after repair value) and base your budget on that number. You can do this by looking at homes in the neighborhood that are similar to your property. These are called comparables (comps). You will want to keep the following in mind:
- All Sales – Don’t just look at homes that are currently listed in your area. View the selling price of recently sold homes in the past 90 days well.
- Comps in Your Area – If there are no comps in your area that might be a sign that the demand in this neighborhood is low.
- Square Footage – When in doubt, try to find a home with similar amenities and square footage. Divide the sales price by the square footage of the house, and you can figure out the price per square foot.
- Bedrooms & Bathrooms – How many bedrooms and bathrooms are in a home is a very important selling aspect. Depending on the amount of bedrooms and bathrooms, your selling price can easily be bumped up or down.
Renovation Costs
Make sure you set a budget and do your best to stay within it. Get estimates from multiple subcontractors like plumbers, framers, roofers, and painters. When you set your final budget, be sure to stick to each component of your project and to stay within your profit margin.
After you’ve received and finalized your estimates, set a timeline for completion. It is important to do anything and everything you can to stay within your timeline, because going over your timeline means going over your budget. When you are fixing older homes, there will likely be unexpected repairs along the way. Try to avoid being surprised and make a plan to deal with these surprise repairs as they come up.
Flipping in the Future
As you embark on more house-flipping, you will get more familiar with the market. It will be easier to anticipate unexpected repairs and how much you will be able to list your investment for once the projects are completed. As long as you are careful to calculate every cost possible, you will be able to make a solid profit.
