Here’s What To Know Before Investing In A Fix and flip property.
Maybe it’s your first fix and flip home, maybe you’re looking for a new investment opportunity or maybe you want to start a renovation project.
Flipping a house can be fun. However, investing in a fix and flip is a big risk, and it’s a long term commitment. If you’re smart with how you spend your money and ensure you find the right vendors, your fix and flip can be a great investment and yield a good return on your investment. Here is what to know before investing in a fix and flip.
Investing in a fix and flip can be a Big Financial Risk
The most important thing to think about when flipping a house is the initial investment. Like any financial decision, there’s a risk involved when you want to get into the fix and flip business.
The financial benefit may seem great right? buy a house at a steal of a price, fix it then sell it for a profit but this is filled with a lot of paperwork and uncertainty along the way when getting funding and so on with actually getting the property, vendors and finishing the remodel.
Make sure you are not only financially prepared for a purchase, but be sure you are financially prepared for all the renovations that come with the fix and flip process. A few things you need to Consider:
- Out-of-pocket expenses
If you can see a profit at the end of the house flipping process, then you’re ready to get into investing in a fix and flip.
The Cost of the Property
Fixer uppers are listed at a discount that varies by the location of the property, but overall average discount is around 8 percent.
Do your research ahead of time about the neighborhood, type of house, and the local real estate market to make sure you’re buying the house at a fair price and you can make profit after all of your expenses with fixing the property.
Your research will pay off when you are prepared to negotiate costs of contractors and materials and buying the actual property, and know what you should be paying.
The Cost of Renovations
The biggest obstacle of investing in a fix and flip is paying for home renovations. This estimate is extremely hard to nail down because you’ll also have to anticipate possible repairs and renovations along the way with the home that may come up.
Be sure to hire a local inspector who understands the neighborhood and has experience with inspecting houses the same age. Then you can make plans to call in contractors for an estimate or start your plans to do them yourself.
First time fix and flippers may want to avoid some renovations. For example, a major roof replacement. If you think you can make some repairs or renovations yourself, you might be able to save some money. DIY projects can be super rewarding, but know when to call a contractor as you can incur more costs if you do not repair or do the work right.
Varying by state and county, make sure you’re up-to-date on all permits (or talk to your inspector and contractors) before doing any major renovations on the house to avid fines that can be avoided by having all permits ahead of time.
Fix & Flip Financing
Once you know how much you’ll spend on your fix and flip renovations and have a plan in place for the project, it is time for financing options. While having cash on hand is great, most of us don’t have a large amount of cash to purchase and renovate an entire house.
There are many different financing options available, so do your research and ask around for the options that best suit your needs and budget.
Bottom-line: Make sure that your investment in fixing up a home can actually make a return on investment along with your fix and flip loan you will take out to help fund your project.
You Can Do It
While coming up with a plan and budget for your fix and flip may seem difficult, the work you do on your house will not only be worth the finished product, but increase the market value when you put it up for sale on the market again. Your investment can transform your fix and flip into a beautiful home for its future owners.
Peach Capital Funding is here to help you understand the fix and flip process and help you receive your fix and flip loan to fund your projects. We have amazing fix and flip loan programs available right now and we can get you funded fast with funding for your project.