The image of money pouring in after a few weeks of work can be quite the lure. However, many real estate investors have the tendency to underestimate costs and overestimate profits.
To make a flip work in your favor, you need an accurate market analysis of the neighborhood value and a realistic plan, including costs to make the flip work in your favor.
2 Flip or Flop Dos:
Be very honest about your capabilities. What can you handle and when do you need to hire a contractor? Lists of materials and prices, as well as bids from a contractor, should give you a realistic view on actual dollars needed to complete. However, if this is your first flip, build in enough money to cover unplanned cost overruns. If this number is greater than or equal to the home’s market price, purchase it. If the number is less than the home price, it’s a remodel you cannot afford.
Common sense tells flippers if costs exceed the value of the neighborhood – just walk away.
Let’s face it not all homes can be flipped. Flipping experts caution against buying property that needs foundation, major electrical, plumbing or HVAC upgrades.
Permits are a must and if you try to tackle some jobs meant for the professionals and botch the job -correcting the problems can wipe out profits quickly. Rehabbing a bad home in a “good” neighborhood is not always a winner.
Knowing the buyer demographics and analyzing a good market analysis allows savvy flippers to make an informed decision. In lots of cases walking away makes smart money sense when it comes to flipping.