Flipping houses is exciting! It can also be very profitable. Following some very important principles can help to tip the odds in your favor that your next Fix and Flip project will be hugely successful! Finding the right property to Fix and Flip is one of the most important steps in the process. In this section, I will share the “secrets” to finding the right property to maximize your profit potential while limiting your risk.
The Initial Concepts
There are a few basic concepts that you need to know before you start fixing and flipping real estate properties. Learning these concepts is the first step in your Fix and Flip business venture.
No Fix and Flip Property is Perfect!
Each property that you consider will have strengths and weaknesses. You will need to determine if you’re qualified and willing to overcome the negative aspects of the property and/or the deal. Don’t be discouraged if a property that you find has a long list of things that need to be dealt with. Consider your budget and calculate if you will be able to make a profit after fixing the property up. Sometimes properties that have a long list of minor issues can seem like more trouble than they actually are. This is a great way to get a good deal on the purchase price. Many buyers will be scared off by a property like this.
Don’t Rush Through the Process
When you’re searching for potential properties to flip, it’s important that you review many options. It may take a considerable amount of time before you find the right property, so don’t make impulsive decisions. The more properties that you evaluate, the greater chance you will have of finding the right property. Looking at many houses will also provide you with further understanding about the process and give you an opportunity to improve your skills. Over time, you will become more proficient at spotting the right home.
Branch Out into Different Types of Properties
There are multiple types of properties that you can use as a source for flipping. Auctions, estate sales and homes of your peers are all excellent options that shouldn’t be ignored. Having different sources of properties will greatly increase your chances of finding the right home to flip.
Using the Right Mortgage Lender
Most people that begin flipping properties will receive funding to help them get started. Many mortgage lenders avoid Fix and Flip projects completely while others will only work with experienced flippers. Brass Financial has one of the best Fix and Flip programs in the country, and they are happy to work with even novice real estate investors. This is a no-brainer. Save yourself the time, you’ve got plenty of other things to worry about. Your Fix and Flip financing is handled!
How to Choose the Right House
There are specific criteria that you should take into consideration for each property that you evaluate. Sticking to this list of criteria will help you make solid calculated decisions in order to minimize the amount of risk that is involved in your Fix and Flip investment. The ultimate goal of flipping houses is to make a profit with the least amount of risk.
Choose the Right Location
The location of a property is a very important element of real estate that will make or break a flip. You want to choose a property that is in a desirable area, because even the most beautiful houses are difficult to sell if people don’t want to live in that neighborhood. A great real estate agent can be an invaluable partner when making these sorts of determinations.
You are looking for school districts with good reputations, clean neighborhoods and proximity to entertainment and shopping areas. The properties that surround the home are also an important factor. A neighborhood with clean homes and friendly people is much easier to sell once the property is ready to be flipped. I can’t say this strongly enough … pay attention to your immediate neighbors. You want to buy the ugliest house on the block … so you can improve it and make the most money.
Perform a Thorough Inspection
Once you have found a property that is located in a desirable area, you will need to perform a detailed inspection to uncover the issues. These will need to be addressed before you can flip the house so be thorough and make sure you are not getting into anything that will be too costly or too time-consuming to fix.
Cracking in the foundation is a major issue that could jeopardize the support system of the property. Ensure that the bones of the house are in good condition, because major property damage will make it incredibly difficult to flip. Take a look through the crawl space to make sure that it’s dry and the flooring is in good condition. Walk inside the home and look for any uneven floors or signs of rot or termite damage. Make a list of all of the utilities within the property and make sure that they’re operating properly. If the water system is connected to well water, you must perform a test for contaminants. Inspect the plumbing and electrical systems to see if they’re up to date.
Stick to the 70 Percent Rule
The 70 percent rule is a ratio that house flippers use to determine the maximum amount of money that they can spend on a property and still make a reasonable profit. You will need to calculate the value of the home after the repairs and multiply that number by point seven. Then subtract the costs of repairs from this number to figure out the maximum amount that you can spend. This formula will assist you in increasing your profit margins and being more confident in your decisions. It works … if your estimates are correct.
Requirements for Flipping a House
If you are ready to get started with fix and flip real estate investing, the following items will make things go more smoothly:
As a general rule, the better your score, the easier it is to get funding for a project. However, Brass Financial’s Fix and Flip loan program even eliminates this requirement. They have programs even for investors with difficult credit score situations! That being said, you may be able to get slightly better rates or better terms with a higher credit score.
Having Enough Funding
One of the worst things that you can do while house flipping is to run out of money. You need to be certain that you will have enough money to complete the flip. Make sure to secure more money than you think you will need. Everything costs more and takes longer than you think it will! The experts at Brass Financial can provide invaluable experience and insight to help you to avoid this type of mistake.
How to Fix and Flip
Purchasing a home with the intention of flipping it is different than buying a home for yourself. Here are some suggestions that can make the Fix and Flip process easier:
If you’re new to any industry, one of the best decisions that you can make to accelerate the learning process is to seek the mentorship of an experienced professional. Try to find someone that has successfully flipped multiple properties and ask them for any advice that they have to offer. You can even offer them a form of compensation once you’ve completed your first flip. They will teach you about the lessons they have learned along the way.
Build Your Network:
Building a solid network of potential buyers is an excellent way to set yourself up for success. Having a buyer lined up when you purchase your investment means that the house will sell once the improvements are completed. This network can also lead you to additional buyers through word of mouth. Teaming up with a local real estate agent who specializes in Fix and Flip properties can be a great way to do this.
Sharpen Your Negotiation Skills
The less money that you pay upfront for a property, the more money that you can make by selling it. Always know the real value of the property, understand where the seller is coming from and be assertive. Bringing the price down from sellers will also make it easier for you to afford all of the updates and to maximize your profits.
Do the Research
Look at the prices of the surrounding properties and decide if the price of the property that you’re interested in is reasonable. Showing the seller surrounding properties that are much cheaper can be powerful for negotiating. Speak with the previous owners of the home and ask them important questions such as any damage or additional features that they know about. If you’re knowledgeable about the property, it will be much easier to make quicker decisions.
Learn the Market
Learn the local real estate market and understand what people are interested in. The main factors that you should consider are where people want to live in that area, and what types of houses are the most popular.
Make the Right Offer
If you hesitate too long to make an offer on a property, there are plenty of house flippers that would happily take your place. Before you decide on an offer to make, know exactly how much money you are capable of spending while still making a profit. Include all of the repairs, renovations, interest and taxes into this calculation, and provide yourself with a financial cushion in case problems arise in the future.
When you’re cleaning up the property and performing all of the necessary repairs, consider hiring a professional service if the task is too overbearing. Some examples of this include hiring an electrician for any wiring issues, hiring an exterminator for pest issues or hiring a painter to touch up the interior. However, you should try to complete as many of the tasks on your own as possible in order to minimize the costs.
In the digital age, it’s becoming much easier for smaller business operations to market themselves to a larger audience. Post listings online and create professional social media pages for yourself. Creating a blog about your business is an excellent way for consumers to find a direct connection with you. Utilizing social media will also grant you access to demographics that you may have had difficulty tapping into previously.
Highlight the Positives
When marketing the house that you’re trying to flip, highlight all of the positive aspects of the property while being upfront and honest about the negatives. Take high-quality photos of the inside and the outside of the home from different angles. Remember to remove trash cans and tools from the photos. Even better, if you can “ stage” the photos with furniture and lighting … you’ll be surprised how many more inquiries you might get.
There is risk involved in flipping houses, but there are high potential earnings if you’re successful. Making smart decisions will put you in a good position to profit. Conduct extensive research into the industry and learn some of the best strategies before deciding if house flipping is the right call for you.
Contact Brass Financial Group
If you need to secure a loan to fix and flip houses, contact Brass Financial Group. We offer no-income, no-doc fix and flip loans, long-term rental, and we lend in all 50 states. As a private money lender, we can grant you the opportunity to bypass the strict regulations of large banks.
Based in Ocean City, New Jersey, we have built a long-time local presence and reputation with a quick and easy loan process. Give us a call at (609)-800-3863 or visit our website at http://brassfinancialgroup.com/ to get in touch with us and learn more about our services.