During the height of the real estate boom, property ‘flipping’ was a popular investment strategy. People snatched up homes, then turned around and sold them at a profit – sometimes without much in the way of improvements. When the housing market soured, however, investors put that strategy on hold.
Fixing and flipping is back in a big way. Some 200,000 properties were ‘flipped’ last year, according to RealtyTrac, with an average profit of $30,000. The foreclosure listing service defines flipping as a home bought and sold within six months.
With home prices increasing in many markets, though, can fixing and flipping still be profitable? It can be, especially for investors who do their research and approach a fix-and-flip with a strong dose of reality. Read more about the reality of flipping homes here.
Here are some ways to increase the odds of your success with a fix and flip:
Choose carefully. Neglected homes in good neighborhoods are a favorite of investors. So are homes with cosmetic issues or smelly carpets that have been soiled by pets. Structural problems, roof issues and faulty furnaces are more costly things to fix. That’s why a home inspection is a must.
Crunch the numbers. You may find a home that seems like a good candidate, but always compare the purchase price of the property to the after-repair value, or ARV. Calculating the ARV can be tricky but it’s key to figuring out if you’re going to make any money on a property. A good Realtor can be a tremendous asset in helping you figure this out. It’s also important to pay attention to the purchase price. In today’s market of multiple offers and rising home prices, it’s easier to pay too much upfront for a property.
Select colors and features of broad appeal. Put your personal preferences aside when selecting paint, cabinets and carpet. Try to make improvements that would appeal to a wide range of potential buyers. Consider remodeling main living spaces with neutral colors over daring color combinations.
For more tips from experts, check out this interesting article.