Are you thinking about delving into the world of real estate investment? Buying an investment property and flipping it takes a certain level of expertise, and it’s crucial to know what to look for during your search. Here are a few things you’ll want to keep in mind before you buy.
Location
You can change a lot of things about a home or building…except its location. As you search for the right property to flip, ask your agent about the most desirable neighborhoods in your area. This can vary more than you might think, especially if you’re on the hunt for a commercial space.
As you tour a potential property, be sure to check out the condition of nearby buildings and determine the feel of the area. Unsurprisingly, you’ll turn a better profit if you choose to invest in a popular community. However, high returns often come with a larger up-front investment, so be sure to choose your location wisely.
Physical Condition
Let’s face it—if you’re looking for a property to flip, it might not be in the best condition. There are some repairs that are worth making…but others might not be. Unless you have a lot of money to spend, you’ll want to steer clear of major structural issues.
Think of it this way: if you spend more on repairs, you’ll make even less after you sell. Some of the costliest repairs include foundation problems, full roof replacements, and big plumbing or electrical fixes. Things like cosmetic issues, old appliances, and weathered flooring might seem like expensive fixes, but they shouldn’t be dealbreakers.
Price
This one might seem like a no-brainer, but it’s important to do the math before sealing a deal. Every flipper has a different way of calculating profitability, but you won’t know how much a flip will cost until it’s all said and done. That doesn’t mean you can’t plan ahead, though.
Experienced investors will probably mention the “70% Rule,” which states that you should pay 70% of the ARV of a property minus the repairs needed. ARV stands for “after repaired value,” and it is the amount a home is worth after you’ve fixed it up. For example, if a home’s ARV is $150,000 and you plan to put in $25,000 worth of work, you should only pay around $80,000.
Potential
Potential may be subjective, but you and your agent can work together to find the right property to suit your needs. When you’re choosing an investment property, it’s best to go with your gut—not your heart. Even if you’ve fallen in love with a building, it’s important to consider its potential. A small residential home isn’t going to work if you’re looking to flip a warehouse space!
If you’re not sure how to identify the true potential of an investment property, look at all the details. How much does it cost? How much will you pay for repairs, and how long will they take? Is it in an ideal location? Can you envision your plan for the space? If you have the right answers to all of these questions, it’s time to make a deal!
Ready to Start Flipping?
Whether you’re an experienced investor or a first-time flipper, you’ll always want to have an expert agent on your side. Just contact Marsha Marsh Real Estate Services for all of your investment needs. We have everything you need to make the right choice—and we’re just a phone call away.