The deluge of DYI, home renovation shows and networks like HGTV make flipping a house look easy. Ask anyone who has done it and you’ll quickly learn it’s never as neat and tidy as a 60-minute show makes it look. So how do you know if flipping a home is a good option for you?
It is true that buying, renovating then reselling a home can be a profitable investment IF you have taken a few things into consideration first.
FINANCES FIRST
Let’s be honest if you don’t have good credit or lots of cash on hand then you should just stop right there. You don’t need a financial advisor to tell you that buying a flip home without either of those is a recipe for a headache. As real estate agents with vast experience helping investors secure these kinds of properties, we can tell you that!
CHOOSING THE RIGHT HOME
This typically depends on 2 main factors… size and location.
Let’s look at the size first. A standard size home is the most likely to always be in demand. In the Charlotte market that is a 2-3 bedroom home, with a price tag around $250,000.00 and 1500 square feet.
The second factor is the location. Let’s assume your renovation plans will increase the value of the home without adding more value than you can get for it in a particular neighborhood. What your renovations will not do however is actually add value to the neighborhood itself. It is imperative you research any neighborhood before you buy in it. That includes looking at how fast homes sell in the area, what they sell for and what development is expected around the property etc. Remember your goal for a flip house is to find a home at the right price in a place that will allow you to maximize your profit.
GET OUT YOUR CALCULATOR
If all the above is good then it’s time to put those math skills you never thought you would need to work. Take the time to compare risk vs. reward. Get as detailed as possible estimating renovation costs. Leave yourself room for surprises aka Contingency budget rule of thumb the amount is about 10% of your overall renovation budget. There is ALWAYS something you don’t expect when you are flipping a house and usually that something costs money. If you don’t intend to do all the work yourself, remember to factor in the cost of the team you will need to pull off your plans.
BEFORE YOU SIGN ON THE DOTTED LINE…. make sure to get all inspections done so you know what you are dealing with, just as if you were buying the house for yourself.
The key to a good investment flip is to sell the property quickly. The longer it sits on the market, the more it will cost you in maintenance, bills, financing, etc. Make sure your real estate agent and/or stager understands you intend to flip the property as this could factor into their advice, and strategy throughout the process.
Flipping homes is only one way to invest in real estate. We’d be happy to discuss other options with you if you want to learn more.