Making a for-profit home seems so easy when they do it on TV shows, right?
All you do is make a low bid on a property that has not been sold before, if it really was that easy everyone would do it.
Flip can be a pretty profitable investment, but you probably won’t make hundreds of thousands overnight. Many "experts" will try to explain how to get a loan to do a flip or, better yet, how to do a flip without money. The truth is that it can be tricky to figure out how to get a flip loan, identify the perfect property and make the right renovation to sell it profitably.
Location, location, location
When it comes to the flip, a few other factors come into the picture besides simple supply and demand. You will need a market with a large selection of homes that you can buy cheaply, as well as a decent supply of buyers to whom you can sell high. The best markets include areas where there are not only a large number of distressed properties at affordable prices, but they also have a large demand for recently renovated properties. Currently, some of the best markets for flips include Baltimore, Detroit, Tucson, Pittsburgh, Memphis, Chicago and the Central Florida area. On the other hand, if you are looking to fix then in San Francisco, Las Vegas, Phoenix or Houston, you may have to settle for a lower profit and a longer time in the market.
How To Get A Flip Loan
So how to make a flip without money? There are several ways to secure a flip loan. You can go through private lenders, such as banks, credit unions and other financial institutions; Hard money lenders, who require you to secure peaceful amounts through real estate or other equity; Fintech services such as online or application-based financial lenders; And crowdfunding sites, an evolving tool for raising money from many different investors.
What are buyers looking for in flip homes?
Another thing you need to look at when deciding to do a flip is what types of homes sell well in your area and in what price range. If everyone in your market is looking for two-bedroom homes, you may not want to waste your time and money on the five-bedroom monster, nor on the tiny one-bedroom apartment. Keep in mind that most flip flops sell for $ 100,000-300,000, according to a report, but the highest profit margins come from homes priced between $ 100,000 and $ 200,000 to $ 1-2 million. It is better not to aim too low because flip houses at a price of $ 50,000 and below actually returned a negative average on the investment, losing about 2%.
The best type of home for a flip is one that requires nothing more than cosmetic changes to make it attractive to the buyer. Maybe, all he needs is a fresh coat of paint and a new rug inside or a cheap yard job. Other repairs that will cost you very little in time and money include renovating kitchen cabinets and adding shiny new hardware. If, on the other hand, you find a home that needs to replace all the canals or a brand new roof, you may want to pass this "bargain" on because you are unlikely to recoup the total cost and equity of its investment those needed for repairs.
Set your maximum bid with a 70% rule.
One way to decide whether to pull the trigger in a possible flip project is to understand the value of what the home should sell after repair, and then double that by 70%. Take the resulting figure and subtract the total estimated cost of all repairs. Your final amount should be the maximum you are willing to spend on the property. For example, if you think you can sell this cute little two-bedroom colonial for $ 200,000 but it will cost you $ 15,000 to repair, you should offer no more than $ 125,000 for the home to ensure a profitable return on your investment.
Get in and out as soon as possible
Your delivery time will also affect how much profit you can make with Flip, since the longer your capital is tied up in an asset, the less capital you have available for other investments. Many experienced contractors strive to repair and bring a property to market within 90 days. Attempting to do so in less time may limit your potential market, as no mortgages will be provided for properties the seller has held for less than 90 days, and neither Fanny Mae nor Freddie Mack will allow anyone who buys their properties to resell them for more than 20% of the purchase price. For 90 days. While 90 days is something that needs to be photographed and documented, it is not always practical.
How long does it take to make a flip?
The question of how long it takes to do a flip to the house depends entirely on the person doing the flip and the house itself. A veteran contractor may find the resources and get the job done very quickly (although it usually takes at least several months to return the home to market). If the house needs a major renovation or needs to be completely demolished, it will of course take someone longer. A general rule is to plan for at least a year.
Use a real estate agent
If you are considering doing a flip, you may choose to do a lot of the repairs yourself to save money and maximize profits. However, when it comes to finding your home and then marketing your masterpiece, your best bet is to switch to a real estate agent. A real estate professional can help you determine which types of homes are selling well in your area and look for candidates for sale at a competitive price - but not too shaky. Can also advise you what types of repairs will give you the greatest value for your money and help you direct your home to show off the results of all this hard work. Not to mention house sales mediated by real estate professionals on average selling prices are 10% higher.
Why is a flip a bad idea?
There are several reasons why a home flip might be the best option for you.
But if you do not have the time or money to devote to the project, then stay away. If you do not have the necessary skills or expertise to identify value, work with contractors and return the home to market, you may not want to get into the business. It's a big investment - make sure it's smart!