So, you are considering applying for investment property loans and flipping a home. This is good news, but flips, even the easiest ones, can quickly break the bank and lead to additional financial problems. Here are three easy-to-remember tips for flipping a home as cheaply as possible.
Plan a Realistic Budget and Timeline
Planning is of the utmost importance when flipping an investment property. Real estate investors who haphazardly approach the flipping process will almost always exceed their initial budget. This can be a major disaster, but by carefully taking the cost of contractors, subcontractors, architects, engineers, and permits, as well as any applicable holding costs into consideration, you can come up with a highly realistic cost project.
Don’t Make Too Many Improvements
Over-improving a property is one of the quickest ways to throw money down the drain. Over-improving occurs when an investor incorporates too many expensive upgrades and fixtures into their flip, causing the property to be valued at a much higher price than homes in the surrounding neighborhood. Buyers searching for a home in a neighborhood that contains primarily $400,000 homes are not likely to spend $600,000 in such a neighborhood when they could spend the same amount to purchase a larger home in a more prestigious area.
Avoid Homes That Require Expensive Repairs
It can be hard to find a perfect home to flip at a bargain price, and more than likely, you will have to purchase a home that requires some improvements. However, all improvements are not equal, and some are exorbitantly more expensive than others. A few broken windows or simple plumbing problems are far less expensive to fix than homes with:
- Foundation or structural damage
- Extensive water or fire damage
- Termite damage
Roofing and electrical issues can also break the bank. If possible, always inspect investment properties before actually purchasing them.
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