Should you get in On The "Fix and Flip" Market?
First things first; what is flipping?
The term "flipping" is really defined as a type of real estate investment strategy in which an investor purchases properties with the goal of reselling them for a profit. Profit is generated either through the price appreciation that occurs as a result of a hot housing market and/or from renovations and capital improvements.
Many people have floated the idea of "flipping homes".
The question is: Should you get involved in the “fix and flip” market?
Steve McIltrot is the owner of A Humble Abode, a Denver home remodeling company. He got involved in the fix and flip market when he started working with a local realtor who calls on him to turn a non-selling foreclosure into a quick sale. According to McIltrot, fix and flips can be a gold mine. In fact, “Fix and flip now is what the stock market was in the ‘90s,” he says
If you’re thinking about getting into this lucrative market, it’s a good idea to have a reliable remodeling company at your disposal. Although the typical fix and flip repairs/spruce-ups are minor, you could run into some snags.
One way to avoid potential “money pits” according to Auito, is to be sure that three areas of the house are solid: electrical, plumbing and heating/cooling systems. “These systems are expensive to correct in relation to the value they return to you upon resale,” Auito says.
Other areas to pay close attention to: roofing, foundation and structural integrity. Unless you have a large corporation backing you with an open checkbook, you want to stay away from foreclosures that have problems in these areas, because your return on investment won’t be substantial enough to make it worth your while.
Let's talk numbers:
Auito gives this example of a successful F&F: “I bought a house for $55,000. Its deficiencies were purely cosmetic. I used other people to do all the work and I pitched in to keep them organized. Ten days later, it was done. I spent a total of $5,000 on materials and labor and it appraised at $90,000 in 10 days!
That’s $30,000 in 10 days, not 3 months.”
The opportunities are out there, however timing and market knowledge are prerequisites to a successful flip.
For more info about flipping a home please contact me directly!