Photo by Jonny Lindner via Pixabay
Making a flip profitable starts with one straightforward requirement: find a great deal. These tips are straightforward but crucial if you want to nail your first flip or your tenth.
1. Spread the Word that You're In The Market
By this point you should have a rock star team nailed down--a few professionals you can trust to help you make your flip a success. But you also want to get the word out to family, friends, and any connections that keep an eye on the market for any reason. They'll be able to keep their eyes open for newly-listed properties that might be right up your alley. Some of the best deals are landed this way, well before homes even hit the MLS.
2. Learn to Identify Big Issues
As you gain experience, you'll develop an eye for projects that are going to be too extensive to take on--and how much the bigger projects will cost you. If at all possible, walk through the potential property with your contractor by your side; they'll be able to keep an eye out for major issues and give you an idea of what you're looking for.
A good rule of thumb? Always look at the roofline first: does it look stable? Weak? Awkwardly added-on? A roofline can reveal either structural integrity or burgeoning foundation issues. Other red flags include evidence of extensive water damage, additions that aren't up to code, and evidence of extensive termite damage.
3. Don't Let Ugliness Put You Off
When you purchase a property to flip, you're purchasing someone else's problem--something they don't want to deal with. That usually mean the property's going to be a train wreck in terms of curb appeal and interior finishes. That's what you want. Aesthetic upgrades are the easiest--and least expensive--to add. Find a structurally-sound home at a great price that just needs a facelift, and you're golden.
4. Remember the 70% Rule
Many pros use this formula to determine whether a home is worth your effort. What do you expect the market value of your home to be after your repairs and upgrades? Ideally, you should pay no more than 70% of that number, minus the cost of repairs you're putting into the home.
So for a home you expect to be worth $300,000 after you put $45,000 worth of repairs and upgrades into it, you'd pay no more than $165,000:
$300,000 (retail value) x 0.70 = $210,000 - $45,000 (repair costs) = $165,000
By spreading the word far and wide that you're looking, knowing what you're looking for, and having a method to run the numbers before you dive in, you'll set yourself up for success. Next step? Plan your renovations like the brilliant project manager you are.
About the Author
Kyung Kim
Hi, I'm Kyung Kim. I immigrated from South Korea to the United States in 1968 when I was 7 years old. I have seen my mom struggle with the English language and work hard to raise her four kids by herself. Still to this day, I don't know how she pulled it off, but she bought her first home in 1979 for $70,000 and because of that decision, she was able to live without worrying about her financial future. I want that for everyone, to feel the pride of home ownership and to build their financial wealth using real estate as part of their financial portfolio. I feel so blessed to play a small role in helping others reach this goal.
I live in Beaverton with my husband, Richard. My mom, who lived with us for several years, passed away in our home in February 2022. Her first home purchase in 1979 made it possible for her to live to the very end, without worrying about her finances. As of August 2022 with a little downpayment assistance, our four children own their own homes. Being in real estate, I quickly realized that if they didn't buy now, they may be priced out of the market in the future. Whether that would have been the case, we will never know, but what we do know is that they are all realizing some good, healthy appreciation in their home values.
As passionate as I am about people owning their homes, I'm also passionate about giving back to our community. I support Compassion First, a non-profit organization that provides aftercare for sex trafficked girls in Indonesia. My husband and I also feel called to financially support social injustice organizations.
I'd love to assist you. Whether you're in the research phase at the beginning of your real estate search or you know exactly what you're looking for, you'll benefit from having a real estate professional by your side. I'd be honored to put my real estate experience to work for you.
