If you’re interested in entering the field of house flipping, there are a few things you should know. Most importantly, don’t be blinded by what you see on TV. Sure, when you condense all the work into a thirty-minute segment it seems simple enough, but there is much more that goes into flipping a house than what TV producers put on your screen. It’s not just cabinets and new flooring. It’s a competitive, ever-changing industry and without the right resources and guidance you might sink before you swim. While we can’t hold your hand every step of the way, we can offer some useful tips to help you turn a profit on your next (or first) real estate project.
1. Put Profit First
If you want to make a profit, you need to make it a priority, and not let emotion or influence steer you elsewhere. When choosing a property to flip you need to be 100% sure that you’re not paying more than 70% of its ARV.
ARV stands for After Repair Value, or what the property should sell for after you’ve repaired it. If what you will pay to purchase the property and repair it exceeds 70% of the ARV, it is not a good investment.
How do you determine ARV? Look at how much similar properties are selling for in the area or consult with a knowledgeable real estate agent. Remember that the cost you pay + the money you put in, needs to = 70% or less of the ARV.
How much will it cost to repair your fixer upper? That’s something that varies from home to home, and depends on how involved you plan to be with the project. If you’re outsourcing all the work, you can request a quote from a local contractor. But if you know how to install kitchen cabinets on your own, paint and caulk, garden and build a fence, then estimating costs will fall on you.
Some things to keep in mind if you’re going to DIY a lot of the repair: you’ll need to find out where to buy cabinet doors, flooring, paint, appliances, etc. and then get price points on all of these materials and products. Being knowledgeable in this industry is obviously a plus so you can closely estimate the cost of repairs on a potential project.
Knowing how to cut costs, for example opting for ready to assemble kitchen cabinets (or RTA cabinets) over pre-assembled, and which flooring materials add the most value for the best price, will help you keep your repair costs where you need them to remain within 70% of your ARV.
2. Get Familiar With Your Market And Your Buyer
Just like every home is different, so is every market and buyer. You need to learn as much as possible about the neighborhood and city you’re looking to buy in to make sure your investment will turn a profit. How are the schools rated? How desirable is this neighborhood? What are the demographics?
Knowing the desirability and security of the market will signal whether this is a risky or solid flipping project. It will also give you an idea of your buyer.
Where the neighborhood is located should give you an idea of who your buyer is, and the house should be flipped accordingly. Is it mostly retired couples? Young families? Single professionals?
Answering these questions is key because they will help you determine if you should sell or rent, and what type of repairs should be made to make the property more attractive to buyers in the area.
3. Be Proud And Price Fair
Make a list of all of the repairs that you did to the property to draw attention from buyers and agents. Don’t forget to include warranties and anything else that adds value to the property. Create a booklet or folder showcasing all of the improvements (pictures help too) and leave this near the front door. This way everyone you invite to see the property will have easy access and a full understanding of the repairs that have been done.
When your house is ready to go on the market, also be cautious in how you price it. It’s not uncommon to feel that the property is worth more because you put so much work into it. But again, you need to leave your emotion out of the equation. Price your property fairly based on its true value, not how much sweat you put into it.
At The RTA Store we help make your dream kitchen a reality with RTA (Ready To Assemble) and Pre-Assembled kitchen cabinets, and accessories with the same (if not better) quality you would find at any retail store but for a fraction of the price. Stop by our website or give us a call and let us make your kitchen dreams come true with the help of our free kitchen design tool!