Real estate investing continues to soar in global popularity. In fact, flipping real estate and home rehabs are now primary focuses for many investors. One of the main reasons for this is that anyone can do it. No longer does rehabbing properties require extensive industry experience or countless years of education to seal deals. It’s simply a matter of staying abreast on all the latest real-estate developments and trends. You can also tap into these burgeoning and growing trends by networking with local agents and real-estate flippers in your area.
While rehabbing properties is a great way to generate substantial incomes — there is still plenty that can go wrong on every deal. In fact, you must understand the core essentials of flipping before investing your funds into these deals. Here are some key elements and aspects you must keep in mind for any successful house flip.
The Offer Price
The purchase — or offer — price is the starting point for any real-estate transaction. The basic rule is that the lower you get the purchase price — the higher the potential upside. However, this is not set in stone — and it is okay to go above your bottom line should the need arise. Sadly, many new investors fail to recognize that the ultimate goal Is not to get the offer accepted — but get is accepted at your asking price. Remember, the end-goal is to make a profit and not just to complete the project.
With this in mind, you can go over the number you think is fair. However, you will surely have to compensate in other areas. This could have an impact on the work quality, as well as the end sales prices. As intricate and detailed as this seems, you must also know when to walk away if the deal is no longer viable. The purchase price will dictate the transaction, as well as everything else you do during the project.
The cost of repairs also needs to be taken into consideration. After all, it will be up to you to add value to the property with improvements. However, how much are you willing to invest? Also, is it guaranteed that you will see a return on investments when the deal goes through? With this in mind, always remember that not all improvements or enhancements will give you the right bang for the buck. This means you need to perform repairs that reflect what the market — and potential buyer and investors are looking for. This means your rehab does not have to look like other properties in the area — but what your target buyers may require.
It is best to consult with your contractor about a realistic set of improvements. These should stay within your allocated budget, while taking into the account the cost of labor, materials and overall work. These expenditures should be reflected in the price you offer, as well as the after repair value. Once your offer is accepted, it is essential that you and your contractor — or team — do everything to stay under the number that is budgeted.
What about After Repair Value (ARV)?
The key to any successful property rehab is estimating what impacts your improvements will make on overall property value. For this, you can access comparable sales and listings online –as well as your general area and vicinity. However, do remember that nothing is ever guaranteed when it comes to real-estate. In fact, some rehabs continue to lay dormant due to a halt in modifications or simply not getting the price owners demand.
Therefore, it is best to study the market and find comparables that most buyers look at when it comes to rehabbed properties. You must also remain committed and positive throughout the ARV process. This means sticking to the budget for property improvements — with a strong focus on targeting geo-specific buyers and learning what they want in any rehabbed home.
Unlike other short or quick sales, house flipping works best when you stay within budget. You may stray off course here and there — but your overall numbers should be preserved — especially when it comes to repair funds allocation. Unfortunately, way too many property rehabbers fail to stay on top of every expense associated with the project. So much so that at the end of the project — they find themselves out of pocket and with no guarantee of an immediate sale and ROI. Therefore, it is best to keep a checklist of the following expenditure to ensure you stay as close to the budget as possible.
– Take into account the expenses related to carrying costs, insurance, and repair materials.
– Keep a strong eye on all property rehab repairs, modifications, and enhancements.
– If you have to go over the budget for any reason, make sure you get compensated in other areas.
– Never forget to add the amount of repairs, labor, and work in your asking price. However, if it comes down to a few dollars or so — you must be flexible enough to accept offers that may be slightly below your asking price.
– Look at the big picture in terms of profits and reimbursement. However, never stray too far from budget allocation — this will reduce your expected profits and you may even have to incur a slight loss.
List at the Right Price
While every property flipper or rehabber thinks his or her home is the best, most buyers simply do not care what you went through to finish the project. All they really care about is the finished product, as well as how much they can save with the investment. As a result, it is best to list a reasonable price for the property; one that can effectively attract and engage buyers but not be too low.
If you have an inflated opinion about the property — you will be tempted to list too high. This will surely turn away potential buyers and may result in your rehab staying on the market longer than needed. Therefore, find a right price by comparing it with others on the market and you should be able to land that sale quickly and within your price range!