If you don’t want your house flip to be a total flop, there are a few traits and characteristics you need to look at before you flip the property. If you don’t take the time to look for these traits, your investment property can quickly turn into a money pit rather than the positive cash flow investment you hope it will be.
Attractive Price
If the price isn’t right, you should take a pass. The key to profitability in flips is buying low and selling high with a minimal investment in between. In fact, if you really want the nuts and bolts of it, you need a price that’s better than attractive in order to maximize your potential earnings on the flip.
Compare the price to other properties in the area, keeping in mind any budgetary needs for improvements, repairs, and updates and then sample recent selling prices for comparable homes in the community. Those figures give you a target price.
The buying price of the home has to leave you enough room to make the necessary repairs, cosmetic updates, factor in a few unexpected repairs or code requirements, and still turn a profit.
Largely Cosmetic Needs
The holy grail of flippable properties are those that are structurally sound and only need a few cosmetic updates. It could be a home that’s lost in the 1980’s or one that had previous owners with questionable taste in bathroom tiles or cabinetry. Regardless, the less you’re required to spend, the wider your profit margin will be.
Of course, this is the reason it’s so important to have a thorough inspection before you make your offer on the home. You need to find a contractor you can trust to give you the real deal about potential problems and existing problems (as well as those that have been covered up and ignored by previous homeowners).
Good Fit for the Area
A one or two bedroom home in a community filled with families, is probably not the wisest investment. In order to appeal to your target home buying audience, you’d have to add another bedroom, a costly proposition though it has the potential to remain profitable if you reign in spending elsewhere. You also want to avoid the oldest, biggest, or most updated home in the neighborhood.
The repairs you make risk pricing it out of the budget for your target market. You really need to understand the people living in the area you’re working with and what that market can sustain when it comes to updates. For instance, few markets are ready for granite countertops and jetted tubs. As nice as they are to have, make sure they’re appropriate for the neighborhood.
Flippable properties come in all shapes and sizes. You can flip a mansion for a tidy profit if you have the skills, tools, and knowledge of the area to make it work. However, making poor choices in the property you pick can cripple your income potential. Keep that in mind as you explore your options.
