All fix and flip opportunities come with risks, but the rewards are great. Whether this is your first renovation or your fifteenth, there are a few things to keep in mind. These tips will help you stay focused on your project and help you get the highest profit possible.
Build a Team
You need a support team to help guide you through the purchase, renovation and sale process. While you will wear multiple hats, it is important to identify those tasks that someone with more professional experience can do. Commercial or multi-family projects will have different requirements than single-family home projects. Take the time to interview people for the following skills:
- Real estate agent
- Real estate attorney
- Lender
- Building Inspector
- Contractors
- Engineer
- Interior Designer
Create a Budget
Develop a detailed budget for each project. Take into account that renovation typically has additional unexpected charges. If you don’t plan for these additional expenses, they will cut directly into your profit. Don’t forget to build some extra money into the budget in case the building does not sell immediately.
Research Loan Options
Make sure you have a business plan in place and know the different loan options available to you. The number of fix and flip projects you have completed successfully will determine the best loan for your situation – traditional loan, hard money loan or line of credit.
Know the Location
You’ve heard the adage about buying real estate, “Location, location, location.” Take the time to research sales comps and review your budget to determine a realistic profit. Understand how planning and zoning ordinances impact the property. This is typically done with a visit to the municipality’s planning and zoning department. The municipality or homeowner’s association may limit the type of work that you can do on the property.
Get an Inspection
Try to write the contract as contingent on a building inspection. The inspector examines major features of the house to make sure they are safe and up to code. This is a great way for you to get an idea of the amount of work that needs to be done and incorporate it into your budget.
Prepare to Sweat
Sweat equity is the best way for you to make a profit. The more roles you can perform on your own, the more profitable your flip will be.
Take the time to prepare yourself for each renovation project that you begin. Identify these factors early in the decision-making process. Doing so can increase your profit margin for your fix and flip project.
