Buying a Property to Fix Up and Flip

Investing in Real Estate Series — Week 4

Have you ever thought about owning an investment property? Then this series is for you! I’m covering everything to know when it comes to investing in real estate, including the different options out there and how to make it happen.

You’ll also get a complete rundown on why investing in a rental property can boost your finances, the tax benefits, plus what you need to know about being a landlord, how you can best flip the right property for a profit, an investment strategy for move-up homeowners, and how you can save money when it comes time to sell an investment property.

This week it’s all about properties to fix up and then sell for profit — what to look for, what you need to know, and how to find the right property.

Are you a fan of HGTV shows that focus on flipping homes for profit? If you’ve ever thought of undertaking a venture like this yourself, you’ll find my tips and insights helpful.

It’s important to know what to take into account before jumping in since flipping properties for profit can involve significant cash, time, and risk. A successful flip starts with buying the right property and knowing your numbers before you ever make an offer.

As always, consult with your financial advisor, lender, and other appropriate professionals before deciding on any real estate investments.

Why House-Flipping Can Be Rewarding

Even though there’s some level of uncertainty in a venture like this, the rewards can hopefully outweigh the challenges you may encounter.

If you have the time and know-how, house-flipping can become a side business where you can potentially boost your income while satisfying your itch for home improvement projects.

Make a substantial profit in a relatively short period of time. Unlike a rental property, a flip is designed to be completed and sold within a defined timeframe. If the numbers work, you may be able to realize your investment return much sooner than with a long-term rental.

Earn a good return on investment. The potential return can be attractive when you purchase below market value, control renovation costs, and sell at the right price. Of course, every project is different, and profits are never guaranteed.

Enjoy renovating without living through it. Some people get the renovation bug. They enjoy working on homes and taking something from a “before” condition to a much better “after” condition. And better yet, you’re not living through the renovation since it’s an investment property!

Less responsibility than a rental property owner. If you want to get into real estate investing but don’t want to deal with tenants or a long-term rental, house-flipping could be an option. You can choose when you want to take on a project, complete the improvements, and sell the property rather than managing tenants year after year.

What to Know Before You Flip

There’s a strategy to house-flipping that you’ll need to follow so you can reduce your risk and determine if you’re a good candidate for this type of investment.

Here’s what you should keep in mind:

Understand what lenders look for — good credit and enough cash. If you require financing, you’ll need to explore loan options specifically suited to your project. Financing requirements can vary, and investment properties may require more cash up front than a traditional primary residence.

Select the right type of loan. Some loans won’t allow borrowers to purchase a home that isn’t in livable condition, while other financing options are designed for properties requiring renovation. Depending on the scope of your project, make sure your financing works for both the purchase and improvements.

Anticipate unexpected costs and delays. Nothing ever goes exactly as planned, so build a buffer into your project budget. Hidden issues, permit delays, contractor availability, and material costs can quickly impact your bottom line. Remember, every additional month you own the property adds carrying costs.

Keep renovations reasonable. Don’t try to take on too much, especially your first time flipping. Consider homes that need cosmetic improvements rather than complicated repairs involving foundations, major structural issues, extensive mold, or complete electrical or plumbing replacement.

Don’t put in the wrong upgrades for your market. Focus on improvements your most likely buyers will actually want—not necessarily what you personally would choose. Understand the features buyers are looking for in areas such as Flint, Grand Blanc, Davison, Fenton, Howell, Brighton, Novi, Waterford, and Clarkston, and make sure your renovation budget matches the price range.

Line up professional contractors before you buy. Know who you want to work with and make sure they have availability before purchasing. Remember, time is money! Holding a property while waiting for a contractor can quickly eat into your potential profit.

Consider a general contractor to oversee your project. If you can’t manage the work yourself, having a knowledgeable professional oversee larger projects can be worth the expense. Otherwise, you may find yourself coordinating plumbers, electricians, flooring installers, painters, and other trades on your own.

How to Find a Good Deal

One of the key factors in making this type of real estate investment work is picking the right home. That can make all the difference between a profitable project and one that doesn’t meet your goals.

• Never overpay. Remember that you have repairs, renovations, holding costs, closing costs, and selling expenses to account for. Look for an older home or property that has potential in a desirable neighborhood—and be willing to walk away if the numbers no longer work.
• Calculate the “after repair value”. Before you buy, reach out to me so I can help you research comparable properties and estimate what the home could potentially sell for after renovations. This information is critical when running your numbers and determining how much you can reasonably spend on the project.
• Research the average cost of repairs and renovations. Even before you start house hunting, have a general understanding of what common improvements cost. This can help you quickly evaluate potential projects before bringing in contractors for detailed estimates.
• Time is money, so understand the cost of owning this home. Once you purchase a property, you’ll have carrying costs such as financing, taxes, insurance, utilities, and maintenance until the home sells. These costs can add up quickly before you even include renovation expenses.

Forget about chasing the hottest market. A competitive market can make it difficult to find an investment property at a price that leaves enough room for renovations and profit. Look for opportunities throughout Genesee, Livingston, and Oakland Counties, and pay attention to neighborhoods where buyers are willing to pay for the right improvements.

Avoid homes with major problems. Be cautious with properties that have significant structural issues or other major problems that can add substantial time and money to your project. You want to complete the renovation efficiently and get the property back on the market.

Consider alternative ways to purchase a property. Foreclosures, auctions, wholesalers, and off-market opportunities can sometimes provide investment possibilities, but they also require careful due diligence. Make sure you understand the risks before moving forward.

How I Can Help You

Not only do I have personal experience flipping properties, but I’ve also helped clients identify homes that are potential candidates for flipping. My experience can help you avoid overpaying for a property or purchasing in a location where your finished home may take longer to sell.

Remember, time is money when you flip a home for profit, so here’s what I can help you with:

• Narrow down a good location. Ideally, you want a neighborhood where buyers are actively looking and where the finished property will appeal to the local market. From Flint and Grand Blanc to Fenton, Howell, Brighton, Novi, and Waterford, I can help you understand what buyers are looking for and what they may be willing to pay.
• Find a property with potential for profit. I can help you identify an affordable home that needs the right amount of upgrades or repairs and evaluate whether the finished property could appeal to buyers in that area.
• Help you understand the after-repair value. I can research comparable sales and help you estimate what the property may be worth once the work is completed, helping you avoid over-improving for the neighborhood.
• Help you time your purchase and sale. Understanding local market conditions can help you plan your purchase, renovation timeline, and eventual listing strategy.
• Help you understand the complexities of financing a fix-and-flip project. I can help you connect with lending professionals who understand investment properties and renovation financing so you can explore the options available for your situation.
• Save you money on renovations. I can help you find the balance between making the improvements buyers want and avoiding upgrades that won’t provide enough value. The goal is to renovate for your market—not simply spend money for the sake of spending it.
• Help you sell your property in a timely manner for a profit. Once your renovation is complete, I can help position and market your home to the right buyers, including guidance on staging, pricing, photography, and other selling strategies.

If you’ve been thinking about investing in real estate but aren’t sure how to get started, I’d be happy to set up a time to talk. Whether you’re considering your first flip in Genesee County, Livingston County, or Oakland County, we can explore the investment options that may fit your goals, timeline, and finances.

As always, I’m your go-to resource for all things real estate!