Rules to Follow When You Flip a House
While the real estate market has been experiencing unexpected fluctuations, smart investors looking to flip homes need to be intentional with their buying and selling strategy. Knowing how to source, buy, fix, and sell strategically, you’ll be able to successfully flip homes in your portfolio no matter what the current market conditions are.
Below are some rules that are important for investors to remember when it comes to flipping so that you don’t buy into bad deals or find yourself in a position where you’re losing money:
Find the Right Fix & Flip Property
It’s in an investor’s best interest to look at several different properties and analyze each one before deciding which one is worth your investment. Rather than focusing on one property at a time, having several potential deals in your funnel can actually help you weed through bad deals and move on to stronger opportunities faster, so you can get the right house at the right price.
Our Returns Analyzer can help you quickly determine if a property is worth your investment, taking into account if it works well with your intended fix & flip strategy.
You can also read more about different sourcing channels you may not have used yet on our blog to help expand your search!
Understand Your Ideal Buyer
There’s a lot of prep work that goes into purchasing an investment property. You need to have a deep understanding of the market, trends, and your own bottom line – but you also need to be extremely knowledgable about who will be buying your property.
For example, say in your local market, most buyers are looking to buy a home under $150,000. However, you aren’t aware of this data, so you buy a home for $200,000, fix it up and go to sell it for $300,000. You may get an interested party here or there, but a majority of your market isn’t even looking in the price range, thus resulting in you needing to take a loss on your property in order to sell it.
Have Backup Exit Strategies
Expert flippers know that they should always have contingency plans, because during the renovation process, some things can and will go wrong. An integral aspect of your investment strategy is your exit plan. While you may expect to just do your usual fix & flip, you might run into some problems with finding the right buyer, or not getting the right profit with your intended strategy.
By having a backup plan before purchasing, you can ensure that you’ll be able to unload this property from your portfolio and/or make a strong profit from it. In our app, you’ll be able to see whether a property you’re interested in is best used as a fix & flip or rehab & rent. However, there are other avenues you can look at for exit strategies, such as Wholetailing.
Know Your Comps
For many investors this part of the process can be time and energy intensive. Manually computing numbers, running analysis, and referencing different comps can take several hours out of your day.What makes it more complicated is ensuring that any properties you are using to comp are high-quality.
Really analyzing and understanding the comps is important to understand not only what you can sell the house for, but to understand the neighborhood you’ll be buying into and the potential that sits there. Backflip can help streamline this part of process, by providing you with up to 10 high-quality comps, so you’ll know whether you have a strong deal on your hands within minutes.
Location Is Everything
Finally, buying in the right location is key in determining the success of your deal. Investors who have a keen eye for market trends have the advantage of predicting where the next inventory boom will occur, allowing them to buy low and sell high.
Unfortunately, most investors don’t know what indicators to look for when determining if an area is on the brink of skyrocketing. In order to expand your business into the right areas, at the right time, read our blog post with a list of the best indicators to help you identify a real estate market that has growth potential.
Whether you’re just getting started in real estate, or you’re a seasoned investor, there’s always ways to improve your business. Keeping these rules in mind as you go through your process will help you not only help you find the right deal for your portfolio, but also exit the deal with the highest possible returns.