Purchasing a property with the intent to renovate and sell can be a lucrative business. However, sometimes it’s difficult to determine if a property is worth your time and effort. If you’re wanting to know when to purchase fix and flip properties, here are three helpful tips.
1. Consider Hiring a Professional
The last thing you want to happen is to lose money on a property. Sometimes it’s hard to know if a property will be worthwhile. One of the best ways to know that you won’t overbid on a property is to hire a professional. While this is the most expensive option, you are more likely to ensure that a property is purchased at the right price and that the repairs will be done quickly and efficiently. Cost, speed, thoroughness and accuracy are important when fixing and flipping a property. While hiring a professional is costly, it guarantees the other factors are achieved.
If you’re looking to cut costs while fixing and flipping properties, doing the job yourself is a good option. Fixing and flipping a property involves a variety of costs including the purchase price, renovation costs, carrying costs and marketing costs. The purchase price is obviously what you pay for the property and renovation costs include all materials and labor necessary to repair and refresh the property. Carrying costs are the expenses required from the time you acquire the property until you sell it. And finally, marketing costs include any real estate agent and marketing fees to sell the property. If you opt to handle all these costs on your own, be prepared to spend the required time and money.
3. Use the 70% Rule of Thumb Method
Evaluating the value of a property can be complicated. However, there is a 70% rule of thumb method recommended when dealing with fix and flip properties. The rule involves the after-repair value of a property minus the repair costs. A simple example is if a property is worth $200,000 after $25,000 in repairs, you shouldn’t pay more than $115,000 to acquire the property. While this is only a suggested rule, it’s a good method to use if you’re looking to quickly acquire properties. This method may lack thoroughness compared with the other methods; however, speed and accuracy are achieved.
When evaluating the worth of a fix and flip property, use these three tips to ensure the right amount of cost, speed, exactness, and diligence.