Home flipping can be a great way to find a low-priced home that needs work, complete the work yourself (or with the help of a contractor), and quickly flip the home for a profit on your investment.
However, before you venture into a renovation project, you should know to make sure that your flip is successful. As an investor, success is ultimately defined by a single factor: your profit. An important part of this equation is selecting the right property for your goals.
These 5 tips from First Bridge Lending loan originator Hannah Edwards will help you set yourself up for a successful flip and ensure that you maximize the profitability on your investment.
- Buy at the right price to make a profit.
Homes that need renovation work are typically priced well below the market value of finished home, and as a result, they tend to attract a lot of attention and offers. When you’re considering investing in a flip property, remember that your ultimate goal in the transaction is your profitability.
Be willing to walk away if a home bids up out of your profit range, and don’t get caught in the competitive frenzy of multiple offers. Stick with a price you know you can make a profit. If the house price goes above your profit margin, find a different property to flip.
- Pay attention to curb appeal.
Curb appeal is an important factor in selling any home. The way the home looks the moment a prospective buyer sees it for the first time will create a powerful, lasting first impression that will go with them as they enter the home. If the home looks old, unfinished, and run down on the outside, then the buyer may not appreciate all the upgrades on the interior as much as if there’s a full package of good impressions.
Don’t forget to pay attention to curb appeal as you’re getting your flip home ready to sell. Here are some key items to focus on:
- Take time to have the yard landscaped with fresh greenery, a lawn, and flowers to make it look welcoming and beautiful.
- Stick with trendy but neutral paint colors on the outside of the home.
- Make sure the gutters are cleaned and the yard is free of debris.
- Update the mailbox.
- Add seasonal décor to the front door (signs, wreaths, etc.) that makes it look like home.
- Want to add a pop of color? Paint the door a contrasting color to draw attention and add a splash of color.
- Know your market and limit your purchases to markets you know well.
A vital factor of a successful flip is choosing a project in a market you know well. By understanding the market, specifically how homes are priced in a particular area, you’ll be able to quickly spot a good deal and get an idea of your profit margin. You won’t know one, unless you really know your market well.
Google the real estate hot spots to find flip opportunities, make sure you’re investing in an area that will support your venture. Make sure that you don’t just look at the listing prices of homes in your target market. These prices are more subjective to what homeowners want to get out of selling their homes. To measure the market opportunity, instead focus on the selling prices of homes. Are they selling at list price? Above or below list price?
You should also know a good contractor and crew (or partner with one who shares equity in the flip) and have them take a close look at any property you’re considering. This way, they can give you a detailed description and pricing on all the work that will need to be completed in the flip, along with pricing and timing.
- Create value in your flip.
Your goal during a flip project is to look for ways you can create value in the home with repairs and upgrades that will be attractive to buyers. Here’s a few of our favorite tips on quick value-adds in flip properties:
- Don’t rip out good cupboards. If they’re in good condition can be painted or resurfaced and fitted with updated knobs to update them with a fresh new look without replacing them.
- Mid-century items are in style right now, so leave features and fixtures from the 1960s era if they are in good condition (but remove or replace anything from the 80s and 90s).
- Remove wide grout tile countertops in kitchen.
- Paint neutral colors.
- Have the home professionally staged for showings.
- Time is money—get in and get out quickly.
Time is of the essence in a home flipping project. You need to get in, make the repairs and upgrades as quickly as possible, and relist the property for the best chance of a good profit. The market can change quickly, so if you take too much time on the renovation, you may be at risk of losing money in the long run.
Also, keep in mind, the bigger the project, the higher the risk. If it’s your first time flipping a home, don’t try to add square footage with new construction on the home. Stick to repairs and profit-boosting upgrades to the home instead.
First Bridge Lending has extensive experience in the flipper real estate investment market. We’re local to California and understands just how the market is trending where you’re looking to buy. We can meet with you in person, attend property visits, and advise you on the specifics of the area where you’re looking to buy and renovate.
For more information on flipper real estate investments, contact First Bridge Lending directly by calling 415-366-1235 for our Petaluma office.