What to Look for in Prime Fix and Flip Houses
Spring is here, and if you’re an investor looking to succeed using fix and flip real estate strategies, that means now is an excellent time to start making deals.
With the weather warming up and flowers in full bloom, you can purchase fix and flip houses now and start fixing them up. Then, you can put them on the market before summer arrives—just in time for families to buy them before the fall school year begins.
The question is, what types of homes should you be looking for? Here’s a no-nonsense guide for finding houses to flip for a great return on your investment.
A Good Location
First, focus on the city you’d like to target for prime fix and flip houses. Then, pay close attention to the neighborhood, as well as the location within the neighborhood. Is your target home’s street quiet or ultra busy? Also, consider the school district in which the home is located and even note the schools closest to it. A home in a safe neighborhood within walking distance of a great school is a fantastic selling point for many families.
You should also pay attention to how close a fix and flip home is to any positive factors, like public transportation and stores, as these amenities will increase the home’s value. On the flip side, how close the home is to any negative factors, like airports and highways, will decrease the property’s value.
Know Your Target Audience
To figure out how you should choose and market fix and flip houses in your target area, examine whom you anticipate your purchasers to be.
For instance, one neighborhood may feature plenty of people who are young and single. In this situation, the quality of the area school district shouldn’t carry as much weight in your home choice. Meanwhile, the school district’s quality becomes essential if you expect to sell to young couples who have small children.
Also, if you’re fixing and flipping a house in an urban environment, how close the home is to a bus stop or train station becomes significant. Furthermore, consider whether there is enough parking in the neighborhood and if your target flip home has a garage or driveway before commencing with your rehab project.
The Right Physical Properties
When you’re finding houses to flip, you certainly want your fix and flip houses to stand out. At the same time, they should fundamentally conform to their neighborhoods, or even look better than nearby homes, if you want them to sell.
For instance, let’s say that all homes in one neighborhood are 2,000 square feet. Each of these homes has three bedrooms and two bathrooms. In this neighborhood, you might find it challenging to sell a 1,400-square-foot house with just two bedrooms plus one bathroom. For this reason, you may need to skip over this house or budget in the costs of adding an extra bedroom and bathroom to the home.
Be sure to avoid overdoing any remodel, though. In the above scenario, if you turn the 1,500-square-foot property into a 2,500-square-foot one, you may end up creating a house that is too costly for the neighborhood. Rather than making a house exceptionally bigger, make it stand out in other, more cosmetic ways—for example, through your curb appeal, landscaping, and finish choices. This is one way to keep your house rehab stress-free.
Also, a general rule of thumb is that the larger your home’s lot is, the better. If your lot is extremely small, you can maximize the outdoor space by providing privacy through landscaping or fencing.
Don’t Get Scared Off By a Home in Poor Condition
The reality is that fix and flip houses that are most successful are often the ones requiring the greatest amount of work. If you need ideas on how to bring the home up to par, take a tour of a similar home for sale in the area that is in a much better condition. This may help you to visualize what’s possible for your target property.
However, as you’re finding houses to flip, if you believe that some of your property options have structural issues, proceed with caution. Remediating structural issues can be costly and difficult unless you possess significant rehabilitation experience.
A Good After-Repair Value (ARV)
Those interested in working on fix and flip houses go into business with the goal of generating a profit from their projects. If your property cost combined with your rehabilitation costs is higher than 70%, the deal may not offer enough of the equity needed for you to generate money at the end of the deal.
Be sure to calculate not only your property purchase and renovation costs but also your closing costs. Furthermore, consider costs like recording fees, transfer taxes, and real estate agent fees (if applicable). Finally, factor in your carrying costs, which include utilities, mortgage payments, insurance, and taxes. These costs will affect your equity as well.
Start Investing in Prime Fix and Flip Houses Today!
You may be, understandably, excited about looking for and purchasing residential properties this spring. However, if you don’t know what you’re getting into, you may end up watching your potential deals fall through before you ever get the chance to start capitalizing on them.
To learn more about how you can succeed as a real estate investor, work with me, Joe Fairless. Together, we may be able to build a business strategy that could eventually allow you to quit your 9-5.