Flipping is a wonderful real estate investment tool if done correctly. The average flip profit in the US is currently over $60,000 a house with some areas well over $100,000. However, if you hope to gain these kinds of profits, you are going to have to do your property homework. Identifying the right investment property will help you avoid flipping pitfalls and gain flipping profit.
Finding the right property is a two-step process. First, you will need to find the right neighborhood, and then you will need to find the right house.
Finding the Right Neighborhood
No matter why you buy a home, whether to live in it, rent it, or flip it, the mantra stays the same: Location, location, location. That is why the first consideration when flipping is to find a neighborhood that will make flipping a home profitable.
When looking for a neighborhood, some things remain true for all homes. You’ll want to look for an area that is growing, has good schools, and has access to amenities and conveniences. However, when flipping, you’ll also want to look for the following:
· Rising Home Value Prices: Areas that are falling or have sporadic home value prices are not likely to be good flipping areas since more money is made the faster the flip can occur.
· Homes Are Selling: Don’t rely on the numbers for a state or even a city. Know how the exact neighborhood is selling. Remember, the more offers there are, the higher the sales price will be.
· Low Number of Rentals: When a neighborhood has a high number of rentals, this may indicate that those selling their homes were unsuccessful, and they chose to rent instead. Since a successful flip requires a quick sale, this may not be a good neighborhood.
· Older Neighborhoods: Older neighborhoods typically have smaller homes that appeal to the baby boomers who are now retiring and want to downsize as well as first-time, entry-level home buyers. Additionally, rehabbing an older home can make a big difference by boosting the final sales price.
· Neighborhood Improvements: Neighborhood improvements will be appealing to new buyers. These improvements include things like street paving, sidewalks, new street signs, or streetscapes.
Finding The Right Home
Once you have determined which neighborhoods are right for flipping, it is time to find the right piece of property. There’s a fine line between a house you can rehab and a property that is too far gone for a profit.
Here are some things to keep in mind as you look for a property to flip. A flippable house should have:
· 3 bedrooms because these are the most appealing to the most buyers.
· At least 2 bathrooms.
· 1,500 to 2,000 square feet to keep rehab costs low.
· High ceilings and modern door openings to provide an open feeling and allow for modern furniture.
· A functional kitchen to allow for cooking and entertaining.
Once you’ve found homes that meet these parameters, you will have to work the numbers to determine the best offering price. That price will take into consideration the home, the rehab cost, and the after rehab value of the home. If the numbers don’t work, then the house is not the right house, and you should keep looking.
The profit of a flip begins when you buy the property, which is why you should keep these tips in mind as you search for your flipping investment. If you buy the wrong property, no matter what else you do, you will not make the profit you desire.