So you’ve made the major, life-changing decision to start your journey into real estate investment by way of flipping homes. Great! Congratulations on making a decision that could change your financial future! You now have a long but worthwhile adventure ahead of you, the first step of many being acquisition.
As experienced fix-and-flippers, we wanted to offer a few tips to help you on your way through this venture. Let’s get into it!
5 Tips When Buying Your First Flip Property
- Do Your Research. First and foremost, you have to start with doing research on your target market. If other homes in the area are selling fast or are getting multiple offers, this is a good sign that you have chosen a sought after neighborhood. This will prove to be beneficial when it comes time to sell the property after renovations have been completed. It is also good to assess how well the local economy is performing and proximity to things like schools, grocery stores, entertainment venues, park access and other amenities. Prospective buyers are more likely to purchase in an area that is close to all of these conveniences. Don’t forget to look at the public school ratings and crime rates of the neighborhood as well. Homes with low crime and great schools are highly desirable.
- Consider Foreclosures or Pre-foreclosures. Foreclosed and pre-foreclosed homes can be a great option for your first flip property. They are usually sold for a below-market price, therefore leaving more of your budget for renovations. Before taking the leap into purchasing a foreclosed or pre-foreclosed home, there are some disadvantages you need to take into consideration. Calculating repair and updating costs may be difficult due to having limited opportunities to inspect the home before closing. That could mean surprise repair expenses you did not plan for. Although you should always have a contingency budget when flipping, an unexpected or undisclosed issue could eat up that contingency fairly quickly. And speaking of undisclosed information, buying a foreclosed property can also run the risk of including undisclosed liens. Conduct a title search before auction or closing so as not to encounter any unforeseen expense later on.
- Run the Numbers This is perhaps the most important step for any first time flipper. The numbers have to be on the mark in order for your flip to be successful. A good rule of thumb is to use the 70% rule – check out our blog post of the 70% rule. In order to utilize this rule, you must first calculate the AVR, or the After-Repair Value of the property (what the value of the home will be once renovated). The rule states that the cost of the property should not exceed 70% of the AVR minus repair costs. Additional research must be done in order to get more precise figures on a property. Speak to your realtor to obtain accurate and realistic resale values, talk to contractors to get exact costs for repairs and always budget for contingencies. Don’t forget to budget for holding costs as well, the expenses you accrue between the time you buy the property and sell it.
- Know Your Timeline. Know now that finding the right property for you is going to be a time-consuming endeavor. It is definitely not something you want to rush. Additionally, once you have found the right property, closing can take time. At Boomerang, we can work quickly with you to close in as little as 2-3 days depending on the property and your experience.. Considering the time that it takes to complete renovations, putting the property on the market and finding the right buyer can mean months of time invested. Be honest with yourself regarding whether or not you have the time to commit to this project. This is where meticulous planning can be of great value. Creating a detailed plan at the beginning will keep the project moving forward in a timely manner. A good tip to save time is to have all of your contractors at the ready to work on the property as soon as you receive the keys.
- Finance With the Right Company. Believe it or not, not all financing is created equal. Sure, you could get a home loan from any number of financial institutions, but why not collaborate with a firm that specializes in real estate investing? A partner in your journey who has personal experience with fixing and flipping properties.
At Boomerang Capital Partners, we offer innovative financing solutions to our borrowers. You talk to a real person about your project and requirements, and we work to get you going. We’ve helped our clients with thousands of homes and hundreds of millions of dollars of funding, across the country. Our experience helps us understand what you’re doing, and work with you to accomplish your goals. We can help get you funded within a matter of days and you’ll be off to a great start on your first real estate investment.
Get a quote today at https://boomerangcapital.com/request-a-quote/