The fix-and-flip method has been extremely popular among real estate investors ever since the 80s property development boom. This method of investing in real estate can be extremely profitable if the investor plays their cards right.
To make an investment, you will of course need a lot of funds. And to receive funds, you can’t really rely on windfalls from family and friends. Most of the time, investors seek hard money loans to quickly capitalize on a real estate opportunity and make large profits.
Doing your due diligence is always advised as the money at stake can be life-changing. So, to help you make the most of your fix and flip investments, let’s take a look at some effective tactics.
Find the right loan type
Since you will have to buy the property and repair it in a short period of time, you will need a loan that enables you to do so. We all know that conventional bank loans can take a lot of time to be processed and approved. In addition to that, you will have to take your credit score into account and see whether you are even at all eligible for a loan.
Hard loans, also called private loans, will allow you to grasp every opportunity that occurs on the market. Despite what the name suggests, hard loans are one of the best fix-and-flip loan options as they are easy to obtain. Make sure you find out how fix and flip loans work before making a decision and learn about the different types to have a better understanding.
Oftentimes, hard loans can have a much higher interest rate than conventional loans but in most cases, you can work to bring it a bit down as private loaners tend to be more flexible than banks.
So, if you are just about to enter the world of fixing and flipping, reviewing all your loan options should be your top priority. Bear in mind that you should rarely fund a project out of pocket as a simple miscalculation can cause damage to your financial health.
Do your research
Most of the time, the investor will carefully research the area and the neighborhood before they proceed with the next step. Of course, this method of purchasing property doesn’t allow the investor to scrutinize all the details but they rather have to rely on their gut feeling and prior experience.
Either way, knowing where you are investing will help you make the right decision on the market, minimizing the risk of a loss. Take a pen and paper, and make a shortlist of all the properties with their location. Slowly go over it and review each property. As you gravitate towards a certain property, get your calculator out and start marking profit predictions.
If you are wondering how much you can get from a successful fix and flip, the profit should range from $20,000 to $30,000
Buy at the right price
The real estate market prices constantly fluctuate. Just a fraction of a second can determine the difference between a profit and a loss. So, if you buy a property at the right time, and pay the right amount, you can expect to make a significant amount of profit.
However, if you buy a property and it turns out that you have to spend a lot of money to make it appealing to clients, you might be looking at a destined loss. Always make sure to buy properties that are easy to fix and not decrepit and uninhabitable ones.
You might feel the urge to completely revamp the property you buy. However, this might send you into financial dire straits. Only improve on the fundamentals and add touches that will only increase the project’s property value. This can include regular repairs, adding a splash of new paint on the walls, making the garden more accessible, and so on.
Avoid adding lavish and expensive furniture but rather focus on the most important aspects of home improvement.
By now you ought to know how you can effectively enter the market and fix and flip properties. Of course, you will have to do a lot more research before purchasing your first property, but it’s always good to cover the basics first.
That being said, we wish you all the best in your real estate endeavors.