Glamorized and made popular by HGTV shows, the fix & flip is a well-known real estate investing strategy, but it’s not for the faint of heart!
If you’re going to become a flipper you’ll have to get comfortable with the idea of buying dilapidated buildings, hoarder houses or otherwise neglected homes. But, for those who master the flip it can serve you well as a means to financial independence.
Why the heck would anyone do this? Let’s take a look at some of the benefits below:
When done correctly fix & flips can earn investors a significant return on their investment. A successful flip starts with buying a distressed property at a low price, making necessary renovations and improvements and then selling it for a higher price.
Unlike some real estate investment strategies that require a long-term holding period, fix and flips typically involve a shorter time frame. This means that investors can quickly turn over their investment and move on to the next project.
Fix and flips offer a flexible investment strategy. Investors can choose to do as many or as few projects as they want, depending on their financial goals and available resources.
By fixing up distressed properties, investors can help improve the overall quality of housing in a community. This can have a positive impact on property values in the surrounding area, benefiting both the investor and the community.
Investors can use financing to fund their projects, which can allow them to purchase and renovate more properties than they could with their own cash. This can increase the potential for profits and provide a more significant return on investment.
Through the process of buying, renovating and selling a property, investors can gain valuable knowledge and skills.
Renovating a property can be expensive, and unexpected issues can arise during the renovation process, such as hidden damage or unforeseen repairs. These additional expenses can impact your expected profitability.
Borrowing money to finance a fix & flip project comes with the risk of interest rates changes, and defaulting on the loan can result in foreclosure and loss of the property.
Holding a property for an extended period of time can result in additional expenses
Working with contractors comes with the risk of subpar workmanship, delays and cost overruns. If you're not doing the work yourself, your beholden to the talent and integrity of others.
Typically, a fix & flip isn’t found on the MLS (multi-listing services) and they are definitely not found on Zillow or Trulia. The two best ways to find a distressed property is to either attend foreclosure auctions or work closely with a real estate agent who has access to off-market deals, like a FI Team agent.
Similar to any auction you’d attend the house goes up for auction, people place bids and the highest bid wins. Before going to an auction you should prepare yourself.
Most auctions will only accept cash, cashiers checks or money orders and you will need proof of funds prior to bidding.
Unlike purchasing property the traditional way with time to look over the home or have a professional inspection, you’ll likely be buying the home sight unseen. You should try to do a drive by of the property prior to the auction. Take in clues of the upkeep of the exterior, the overall neighborhood and possibly peek in the windows if it’s uninhabited.
Realtors can save you time and money finding you the right property for a flip. Working with a realtor can also reduce your risk of a flop because they can provide their expertise on what properties will likely have the best return on investment. Partnering with an agent is loaded with other benefits:
Realtors often have access to properties that are not listed on public websites or the MLS. This means they can present investors with more opportunities to find distressed properties suitable for your project.
a realtor who works with flips can provide recommendations to other professionals who can assist with the fix and flip process, such as contractors, home inspectors and lenders.
