If you have a good eye, you can see any home’s real potential – even if it’s in a sorry state of disrepair. However, no matter how good you might be at real estate investing, there are always some improvements to be made. Here, you can learn some of the best tips and tricks for ensuring a profitable fix-and-flip experience.
Don’t Pay too Much for the Property
First things first, make sure that you are paying a fair price for your fix-and-flip property. If you pay too much out of the gate, you’ll have very little room to invest your money into improvements, which means you won’t be able to build the value that will command a good price. Make sure that you do your research and ask a real estate agent to help you figure out the home’s value – or better yet, get a professional appraisal if you’re serious about purchasing the property.
Improve the Right Things
It can be incredibly tempting to put your improvement funds into areas that you think would benefit the potential homeowner the most, but this can be problematic. Each neighborhood has its own set of wants and needs, so be sure to keep this in mind. For example, in one neighborhood, a home without an outdoor pool may not be considered desirable. In another, homeowners may not want outdoor pools. Look for the best possible improvements with a high return on investment potential to really profit from your project.
Plan Ahead for Setbacks
One of the most common mistakes that newer real estate investors make – and even one that seasoned investors still make from time to time – is failing to plan for a potential budget setback. For example, imagine that you’re tearing out a wall to open up the main living space and you discover black mold. If you haven’t budgeted for the unexpected, this can be a devastating discovery. Always leave a little room in your budget for unplanned expenses so if you’re caught off guard, you can simply step back, fix the problem, and keep moving forward without completely obliterating your profits.
Always Check Prices for Materials – and Always Measure
Believe it or not, another common issue involves failing to take the prices for materials and labor costs into consideration prior to purchasing a home. If you’ve figured that you want to spend X amount of money per square foot on labor and materials but it turns out that the home is 300 square feet larger than was listed on the tax assessment, that’s a lot of extra money you’re spending, and you may not have it in the budget. What’s more, if you’ve always purchased laminate flooring in bulk for $2 a square foot from a family friend, but that friend goes out of business and the price doubles, this can also be devastating. Measure the house yourself and always check the prices for materials and labor in the area before you get started.
Fix-and-flip investment projects are incredibly exciting. Not only do they give you an opportunity to turn a substantial profit and build wealth, but they also let you watch a home transform from something outdated and perhaps even run-down to something modern and beautiful. The tips above will help you keep your projects profitable, whether it’s your first fix-and-flip or your thousandth.