Flipping Properties: What You Need to Know
For so long, real estate remained on the list of the most profitable investment options. Especially in locations exhibiting rapid development, it’s one of the best ways to make your money work for you. Apart from being an income-generating investment, real estate is also a great way to build wealth. The deal is made sweeter by the fact that in most cases, real property appreciates in value. Whether you’re targeting residential or commercial property, there are various investment options to choose from, including becoming a landlord, groups, trusts, and property flipping. Since this article focuses more on the latter, flipping is a form of real estate investing that involves looking for neglected or dilapidated properties that are below the market standards, repairing, and renovating them for reselling at a profit. In other words, it’s about discovering a property’s potential, buying it, and fixing it to enhance its value before reselling it. For the new or upcoming house flippers out there, here are a few things you should know about flipping properties.
Location and Research are Crucial
New flippers encounter the common problem of deciding on the type of property they should invest in, especially based on its location. In this case, conducting careful research can help you in finding out which locations have the ideal kind of house to flip. As a wise investor, you’ll want to avoid going for over-flipped areas because, more often than not, the market is more competitive and prices are lower since buyers end up being spoilt for choice in such places. If you are looking for a potential market, the best places to flip a house would be where overall development is lower but steady, hence a higher demand for housing.
Getting the right location is very key to the success of your business as a flipper. If, for instance, you buy a house in an upcoming neighborhood, then you be relying on the increase of value for that neighborhood after some years. It always pays up more if you invest in the locations where land value is likely to appreciate since your property will be in higher demand, meaning more profit. Look out for estates with a higher number of neglected/old houses while avoiding areas with newly developed houses that cannot be flipped. It’s also safer to avoid investing in too many areas at a go.
Your Budget Determines Your Success
Property flipping also requires putting your finances in good order. Once you buy the property, you’ll also need to have enough capital to cover the costs of rehabilitation and repair, which can sometimes go higher than the amount you spent on the property. Fortunately, many banks and other lending institutions have financing solutions for real estate investors like you in case you’re a bit short on capital. As stated by Martin Alexander from expertmortgageadvisor.co.uk, if you visit the website, you will discover different types of buy to sell mortgages, including short term loans, refurbishment finance, and flexible mortgages. Your main focus should be securing a financing deal that attracts the lowest interest rates so you can maximize your profits.
Also, you’ll want to calculate the cost of the project properly for sustainability and viability. Remember, when the market is at its low, obtaining a mortgage for such a project might be an uphill task unlike when the market is booming where you can get a loan easily. In addition to the property’s price, rehab costs, and mortgage interest, you’ll also want to include things like realtor costs, lawyer fees, and insurance costs in your budget.
The Seller Matters
If you buy a property at an auction, say one that has a defaulted mortgage from a bank, you are likely to get a bargain on a highly underpriced house. Also, if you want to buy a fixer-upper, you will be devoting yourself to improving the house, which will, in turn, consume both money and time, especially if the owners did not pay for the maintenance which could hide several renovation costs. These are just two examples of situations that make it important to consider the seller you’re buying from.
Working with Real Estate Agents/Brokers
Your returns will be determined by how fast you will sell a ‘Buy & Flip’ property. If you want to get any latest information in the market regarding properties, real estate brokers and realtors are your most reliable source. Agents always have first-hand info on properties in the market, especially for locations whose markets you’re not so familiar with.
At the end of the day, property flipping is a highly lucrative business and investment. However, it all depends on how you approach it. With information from the few points above, achieving success can be easier for you even if you’re a beginner in real estate flipping.