If you are an investor looking to diversify your portfolio you may be aware of the concept of fixing and flipping a home. This is essentially where you buy a dilapidated home that needs substantial renovations, undertake the building work and then subsequently sell the property, hopefully generating a significant profit in the process. The process of undertaking this business venture can take as little as six months and when done well can generate significant returns on your initial investment. In addition, it is worth noting that the housing market tends to be more stable than the stock market making it a better choice for some investors. In this article some of the key ways to ensure that your fix and flip investment returns a profit will be discussed in detail.
Find the right opportunity to buy
One of the most important considerations for any fix and flip investment is knowing what constitutes a good building to undertake the work on. The initial costs of purchase and the subsequent renovation work must be less than the price you eventually hope to sell the property for. To ensure you get a low price for the property it is worth going to property auctions. The auction market for homes tends to include those that have been repossessed due to bankruptcy or homes that are in a state of disrepair which results in most real estate firms not taking them on to sell. Some homes may have even been seized by the government. Clearly, in auctions, there is significant potential to find an ideal property to fix up. However, if you are new to auctions it is important to stay calm and cool-headed and stick to your intended budget. Auctions can be fast-paced, and it is easy to get caught up in bidding wars with other potential buyers. Make sure you bid only to budget and halt bidding once it goes above this value.
Ensure you have the finances
Before embarking on a fix and flip investment you must be certain that you have the finances to cover the cost of the property as well as the subsequent renovation costs. Such projects tend to require significant amounts of money in a brief period. If you do not have stored savings that you can use to fund the project, it is worth investigating private money lending firms such as Sachem Lending. Companies such as this specialize in short-term loans specifically for fix and flip investments. Consider the money lending market as a whole and choose a firm that covers your needs with repayment terms that you can comfortably afford.
Accurately cost your renovations
When planning your renovations, it can be beneficial to use 3D design software along with project management software. This can allow you to determine with a high degree of accuracy the materials, costs, and timescales for each part of your renovation work. Remember that the more accurate you are with costings the less likely you will be to go over budget. It also makes sense to overestimate costs rather than underestimate them. Building work can be subject to delays and unexpected issues so budgeting on the higher end of projections should ensure that your project still turns a reasonable profit.