![]() ![]() Expect to put time and money into marketing If you lack proper discipline, you’ll wind up worse than when you started,” says Billy Ross, CEO at RFTA Properties, a residential real estate investment company in Winter Park, FL. “If all goes well, you’re about to start making money in large chunks. It’s also important to have your own financial house in order before you start. ![]() Be extremely organized, and document every purchase order, utility bill, and closing fee that’s involved in the project. That means tracking all of your expenses so you can make better decisions for greater profits. Several investors pointed out the importance of running your blossoming home-flipping company as a business-because it is. Get your own finances in order before you start Of course, everything should be functional and up to code, but you want to create an instant emotional connection for potential buyers.” 6. Research shows buyers want a nice kitchen and bathrooms. Lyon agrees: “Focus on value-add renovations and amenities. “Often, the ultimate buyer of a flip expects the home to compare with existing homes-or even new construction-in quality and value,” says Greg Kurzner, a Realtor ® for ERA Atlantic Reality in Alpharetta, GA. Provide a quality productĪs fast as homes are selling today, the market is filled with many discerning buyers. Most importantly, start building relationships with contractors in the areas where you invest, so you know whom you can trust for any project. This section will save you a lot of time and money on the back end of the project,” says Shawn Breyer of Breyer Home Buyers, a real estate investing firm in Atlanta. ![]() “The scope of work usually includes working with the city to obtain permits, ordering materials and equipment, and confirming the house plans. You may be able to head off issues with contractors-including plumbers, electricians, and general contractors-by ensuring they present a clear scope of work for the project, experts advise. Make sure the contractors have a clear scope of work “Be cautious about choosing the cheap price and, instead, go with the contractor who offers the best quality and most professional work for your money.” 4. “You do have to manage costs prudently, but going with the lowest contractor bids usually end up costing you more in the long run,” says Faccone. “When I was new, I thought in order to keep as much profit margin in the flip as I could, I needed to choose the lowest contractor bid,” says Jonathan Faccone of Halo Homebuyers, a real estate consultant in Bridgewater Township, NJ. Don’t always go with the cheapest contractorįinding the right contractor can help keep renovation costs in check-but right does not always mean the least expensive. That’s why Lambert advises new investors to build a buffer of up to 25% into their rehab estimate. Permit delays, bad weather, and unforeseen expenses can all throw a wrench in the works-and revise your bottom line. Build a buffer into your renovation budgetĪnyone who’s undertaken repairs on their house or an investment property knows things rarely go as planned. “Our detailed formula makes our offer more competitive for sellers while still providing us a nice profit.” 2. However, Lambert recommends a more exact formula: “We calculate MAO as ARV minus rehab estimates, selling costs, and minimum gross profit,” he says. That will give you the MAO you should make on the property. For example, if the property’s ARV will be $150,000, you would subtract the costs to flip (including the cost of a loan, repairs, and other fees) and then multiply that number by 70%. The general rule when determining your MAO is not to pay more than 70% of the property’s after-repair value, or ARV, minus repair estimates. Going above your MAO is just asking for trouble,” says Ryne Lambert, co-founder of Sell My House, a real estate investment firm in Green Bay, WI. ![]() “Real estate investing is a numbers business, and if the deal doesn’t make sense when you crunch the numbers, you should be able to walk away,” says Hayden Lyon of Cowtown Home Buyers, a real estate investment firm in Fort Worth, TX. There are certain formulas that every house flipper needs to calculate in order to make a profit. Our experts all agree that buying a fix-and-flip investment should not be an emotional decision. ![]()
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