As more and more people turn to home flipping as an investment strategy, the risks inherent to this line of business can be daunting if you go it blind. It’s incredibly important to have a solid understanding of your local housing market and costs so you can recognize a good deal and confidently project how much your fixer-upper can sell for. This will set you apart from your competition and put you on a path to financial freedom.
It’s a good idea to work with a real estate agent who can guide you throughout the process and a general contractor to examine the property. As a rule of thumb, investors should pay no more than 70% of the after-repair value (ARV) of a property minus the repairs needed. The ARV is what a home is worth after it is fully repaired.
Create a Budget
As with any venture, a business plan that includes a budget is a no-brainer. One of the best ways to stay within your budget is to record all expenses and allow enough breathing room for unexpected costs. Consider aspects like how much money you are able to put toward a down payment, how much money you need to borrow, how much you are looking to make from the resale, and how much time you plan to take for the renovation.
DIY Where Possible
While works such as plumbing, electrical, and roof repairs are better left to professionals, there are a number of ways you can cut costs without cutting corners. Some DIY projects anyone can try their hand at include pressure-washing driveway and pathways, repainting front door and walls, and upgrading bathroom hardware and fixtures. Get creative and save money!
Speak to a Contractor
Successful real estate investors boast an ample network of trusted service providers, such as plumbers, electricians, roofers, carpenters, and painters with whom they partner to snag competitive prices.
It is important to put yourself out there and build these relationships over time. Note, however, that pricing is only one factor to consider. You’ll want to make sure that the contractors you team up with have the appropriate certifications and licenses as well as an untarnished reputation.
Are you interested in learning more about real estate investing? RLG would love to help you find a suitable investment strategy for your goals! Call us today to learn more!