When buying a property to flip, you must do your research and when you find that property in the area you are looking for you need to take action. Too many people lose out on deals because they are not quick enough to act. In order to maximize profits on a house flip you must buy the property at a discounted price. There are many things you can do to maximize profits on a house flip once you own the property but it is vital to buy that property at the right price, remember in any real estate deal you make your money on the buy.
How to Maximize Profits on a House Flip
If you’re ready to put in the work, there is certainly good money to be made. Just be smart, as emotion-free as possible and get ready for the ride, and no, it’s not as easy as it looks on TV. With that being said if you follow the tips you below you should see quite a bit of success:
- Do the calculations – Figure out what you can spend on the house and the renovationand make sure to include how much risk you are prepared to take. Price out the cost of carrying a short-term loan, taxes, utilities and maintenance on the home for up to a year. Price out your material costs and labor. Look at comparable sales in the market to see what the likely sale price will be and don’t expect appreciation. Once you have a financial plan in front of you, with an acceptable degree for risk, begin looking for homes that meet your model.
- Know your market – Is this an established area with rising prices? Is it a transitional neighborhood with good potential that still has room to grow? Is this an area with good schools that will attract families? Knowing your market will help you to choose the most desirable home and it will also help you determine what your profit margin will be. Every neighborhood has a price cap, make sure you don’t price yourself out of the market. Know what that is. Doing your homework on recent sales and average days on market can give you an idea of how long you can expect to hold the property before finding a buyer.
- Don’t overprice – It’s tempting to look at your renovation, love what you’ve done, factor in all the sweat equity and overvalue the home. Remember, your buyer likely didn’t see it when you started. They have no idea how much stress you went through. They see the finished product only, and they have been shopping the market, touring the comparable homes. Every neighborhood has a general price point, and you need to stay within it.
- Know your buyer and renovate with that buyer in mind – If this is a neighborhood with good schools, then your buyer is a young family. Spend your money making the family space open. Make sure there are enough bathrooms for kids and invest in a Jack and Jill vanity in the hallway bath. Don’t focus too much on the master suite, but make sure mom and dad do have their own bathroom. If this is a retirement area, look for a home with just one main level or a ranch style. Make sure the home is easily accessible from the street.
- Educate your buyer – You put in the work—make a list. Disclose every system that was replaced, from HVAC to electrical and any structural problems that you repaired. List new appliances and fixtures and present a binder with all instruction booklets and warranties. Let buyers know every detail of how your property is indeed move in ready.
If you are serious about maximizing profits on a house flip, you need to follow these 5 tips above. Remember, it is not as easy as it looks on TV, but that doesn’t mean you can’t have serious success in this business. Your goal should be a 30% Return on Investment which is definitely attainable in today’s market. Happy investing and maximize those profits.