Whether you’re an experienced flipper or just getting started, finding the right property —the one that will sell quickest and for highest dollar— can make or break your flip. But it’s not always obvious. Even foreclosures can be bad investments if they don’t have a few tried-and-true characteristics.
Here are six signs a property is the perfect fix and flip candidate. What would you add to the list?
1) It’s in the right location
Location is, and will likely always be, one of the most important factors in real estate investing. Properties that are close to good schools, local amenities and the like will typically sell quicker and for higher dollar. When scouting potential fix and flip investments, be sure to do your due diligence on the area —at both a macro (the metro area) and micro (the neighborhood) level.
2) It’s built after 1978
Properties that were built prior to 1978 could contain lead based paint and would require that you abide by the Renovation, Repair and Painting laws of the Environmental Protection Agency. While this is certainly doable, it can add additional time and cost to your flip —and you’ll need to document every step of the flip in case there is an audit. If you look for homes built after 1978, when lead based paint was no longer manufactured, you should be in the clear.
3) It has a great floor plan
A fantastic floor plan can make selling your flip infinitely easier, as it will appeal to a wider pool of potential buyers. Watch for properties that have a great flow —as removing and moving walls (particularly those that are load-bearing) can be quite costly and will increase the expenses associated with your flip.
4) Its value-add potential is clear
When you start looking at potential flips, consider the clear value-add. Is it pretty clear that the house needs a new kitchen, new paint and new landscaping to be marketable? Was the home foreclosed on and needs a new roof and surface updating? Watch for properties that you know you can add value to.
5) Its purchase price makes sense
Perhaps most importantly, be sure that the purchase price plus the costs of repairs and any additional carrying costs will give you a comfortable margin when it’s time to sell. Pull comparable properties to understand what’s selling (and what’s not) in the immediate area, and be sure to make adjustments based on size, location, quality, etc. And, always look at the worst case scenario to make sure you’re covered.
6) It will resale near the area’s median
Another good rule of thumb when selecting the right fix and flip property is how close to the area’s median home price the property will be once complete. Many flippers target properties that will fall close to the median price in the area —as it is more likely to appeal to a wider audience than a home at the top of the market.
Finding the Right Flip
Whether you’re an experienced flipper looking to borrow funds for your next flip or an investor searching for the right project, be sure to explore your options on Patch of Land today. We’re always just an inquiry away and look forward to helping you make smart, sound investments. Connect today!