Image via Wikipedia1. Research the area of the home prior to purchase
The easiest way to research the housing market in an area of a potential house flip is by checking the local real estate companies online. Most real estate sites have a list of all the homes in a specific area that are on the market, study the comparables, the prices, and take a look at the photos included with the listed homes. These will give you a great idea as to what others in the area are offering in their homes. Take note of the kitchen cabinets, counters, flooring, and bathroom conditions. These are the competition, along with new construction, which is also something to research. New construction for your target listing price need to be looked at as well. This will tell you exactly what home owners are looking for in your home.
2. Don’t ignore red flags, get a home inspection
Before agreeing to purchase a home, go over it very carefully with a fine toothed comb and have it inspected by a professional. Most homes that have potential to be flipped are in bad need of repair, certain issues that are hiding in homes that are in disrepair are huge red flags. Look for the following red flags: mold, water damage, termite infestation, carpenter ants, cracks in the foundation, and standing water in basements. These red flags can lead to expensive budget busting fixes and set back your date of completion well beyond your goal.
3. Repair instead of replace
Your budget is the single most important tool to have at your disposal. Getting caught up in cosmetic wish lists can send you right into a poor house that looks worse than the one you’re working on. In a successful house flip, it is not necessary to totally gut rooms. In fact these types of moves can consume your budget, drive down your profit and extend the amount of time you have to get the home ready for the market. If cabinets aren’t to your liking, refer back to your research to see what other homes are offering in the area. If most offer builder grade oak cabinets, etc. there is no sense in your adding high end Maple and /or Cherry. Consider cabinet re-facing, and painting the existing cabinets to freshen up the look in the room. If other homes have standard laminate counter tops, simply have your houses counter tops re-laminated using a great quality laminate that is still a great improvement over the competition without consuming your budget like granite might, which may be an over improvement for the neighborhood and for your homes price point. Its not about having the best , its simply about having better. Give yourself a budget buffer for all unforeseen problems, including the possibility of carrying a few mortgage payments if the home doesn’t sell by the time your mortgage is due.
4. Don’t take it personal
One mistake many house flippers make is exceeding their budget by putting taste specific upgrades into the flip along with a long wish list of features that suit them personally. It isn’t about you it is about the potential buyer. Keep your color pallets neutral, fresh and update reasonably. A buyer looking at a $150,000.00 home isn’t expecting a mansion, they are looking at the best possible deal for their money and your advantages must be played up.
5. Location, location, location
Buying a fixer upper in a economically depressed area is a bad idea. If they whole neighborhood looks bad, fixing your home up won’t get you a profit. Keep in mind that home values are at all time lows to begin with, even in most upscale areas. Find that one rotten egg in what would ordinarily be a wonderful up and coming area and focus on that target.
6. Get those permits
Make sure you get all of your building permits prior to any work being done on your home, especially if you plan on major gut jobs, adding square footage, electrical and plumbing over hauls. Make sure you tackle those big problems early on and leave the cosmetic improvements to the last stages in the flip.
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