Long before the term flipping was ever heard on a cable television reality show, homes were bought by real estate investors, renovated, and then sold to new owners for profit. The continuing popularity of this established method of real estate investing is largely due to the fact that buying real estate has always been considered to be one of safest investments for long-term profit. Readily available in every area, real estate can be purchased in all price ranges, conditions, and types, making it well-suited for both novices and pros.
So it is no surprise that real estate continues to attract new investors of all ages and income levels. But for those who are interested in trying their hand at fixing and flipping a home for the first time, following some of the basic guidelines listed below can help to ensure that the fix-and-flip investment experience will be both positive and profitable.
Learn the Market Before Diving In
Buying an inexpensive home is usually the easiest part of the fix and flip process––with getting it sold successfully later being the much harder part. To avoid purchasing and becoming stuck with a home that will not be easy to resell, it is important for novice investors to take time to learn about the general area in which they plan to invest. Information needed to make wise decisions before purchasing the first home includes:
- Average selling price range and days on market (DOM) for properties sold as move-in ready homes in the area
- Current or upcoming zoning issues that could have a positive or negative effect on reselling the home after it is renovated
- Expected market trends that will affect the property
- Percentage of renters versus homeowners and any trends related to this
- Specific zoning laws or regulations in the area that may affect the purchase, renovation, or resale of the home
- Demographic and neighborhood positives and negatives that could influence potential buyers, such as quality of schools, crime rates, infrastructure conditions, distance to major employers, lack of parks or green spaces, etc.
Researching to learn the basics of real estate entrepreneurship can make it much easier for beginning investors to determine their purchase and renovation budgets, price their completed properties, and closely estimate the amount of time it will likely take to market and sell the property once the renovations are completed. An experienced real estate professional with a track record of success in marketing and selling investment properties can help novice investors learn how to source and verify this type of helpful information.
Determine the Needs of the Target Buyer Demographic
New investors may have difficulty in learning to select homes and decide on renovations based on what buyers in the area are looking for instead of those that align with their own personal tastes. In order to be successful in the fix and flip world, sellers must approach home purchase and renovation projects from the vantage point of the most likely prospective buyer.
For instance, the new investor may think it better to convert a compact three bedroom home into one that has two larger bedrooms, instead of three. But if prospective buyers in the area are typically young families with children, doing this can turn away those buyers and make it much more difficult to sell the Juno Beach home. To avoid this type of problem, investors should always take time to learn about their most likely potential buyers and base any renovations on the needs and desires of these buyers.
Price According to the Market
The process of fixing and flipping Singer Island real estate can lead to expenses for unforeseen repair issues and delays that jack up the cost of the project. When this happens, novice investors sometimes look to recoup those costs when pricing the home for sale. But overpricing a home will only reduce the number of potential buyers who choose to view the home, increase the number of days required to sell it, and make it more likely that the investor's first experience as a fix and flipper will not be a successful one.
Instead, new investors should take the time to get and understand a detailed Comparative Market Analysis (CMA) from their listing agent at the time of purchase and another when the home is completed and ready for market. A CMA is a tool for helping new fix-and-flippers stay within a healthy budget during the buying and renovating process, as well as for ensuring their marketing price is correctly positioned to reduce market time and earn a profit on their investment.
Far from a fad, fixing and flipping residential real estate is an investment practice that has been tested by time. If you are interested in beginning your fix-and-flip journey, start by hiring a real estate professional who has a track record of success in working with real estate investors to make sure you get off to the best possible start.