Fix and flip real estate involves purchasing a property that needs renovation and has potential, below market value.
What is FIX And FLIP?
Fix-and-flip is the strategy of purchasing a property, renovating it, then selling it at a profit.
also known as house flipping, consists in purchasing a property in need of repairs for a discount, renovating it, and selling it for a profit within a short time. Keep in mind that if a property is bought at full purchase price, this will yield much less of a profit when it comes time to sell. To avoid keeping their funds immobilized and additional costs (property taxes, interest rates, and more), investors need to resell the building as quickly as possible.
In most ideal cases, the house is bought, fixed, and sold within 12 months.
Fix and flips are one of the most popular niches of real estate investing, especially for beginners, given that they are relatively straightforward with low entrance barriers.
Dive into the captivating world of fix & flips, where acquisition, renovation, and resale become an art form. The journey, fraught with pitfalls and opportunities, requires a strategic approach to ensure success. Michael Forkas of the Forkas Home Team breaks it down step-by-step, revealing the secrets behind a flawless fix & flip. Plus, discover the unbeatable promise that sets him apart: 'Your home sold guaranteed, or I'll buy it!' Ready to master the game? Let's get started.
Where to Start?
Limit your financial risk and maximize your return potential. This means you shouldn't pay too much for a home. And make sure you also know how much the necessary repairs or upgrades will cost before you buy. You can then figure out an ideal purchase price once you have this information.
Here are some of the most common mistakes associated with house flipping.
Flipping Mistake #1: Not knowing the local real estate market
For a profitable fix and flip project, you as a real estate investor need to be able to recognize a property priced significantly under market value and evaluate how much you can sell it for once you have fixed it, using tools like after repair value.
To do so, you need to be extremely aware of:
the local trends
what buyers are looking for and their expectations
and more
Flipping Mistake #2: Over improving the property
Remember: you aren’t renovating a house for your needs; you’re renovating a house to sell it. By overspending on high-end finishes, you will have issues recouping your costs and selling the property at an acceptable price once all is said and done.
Flipping Mistake #3: Taking on a project too difficult for your experience level
Fixing a property can quickly feel like opening Pandora’s box. Even though the price of a distressed property may be right, you need to take an honest look at your qualifications and your budget before taking on more than you can chew.
If the numbers don’t add up, for example, if the profit margins are too low, if it’s too much of a risk, or if you already have your hands full with other aspects of your real estate business at the moment, it’s important to know when to choose a different property; this is a skill some of the best real estate investors have mastered.
Flipping Mistake #4: Failure to Write a Business Plan
When you are trying to make money from a find and flip property, it’s important that you have a written business plan to serve as your guideline. Flipping a house can be a lucrative investment, but it’s crucial that you have a written plan about how to flip a house.
You don’t want to be making decisions on the fly, and a business plan ensures that you’re not. When you have a written plan that covers costs, marketing, contractors, and every other aspect of your find and flip, you are far less likely to waste money by responding to issues instead of being proactive.
The surest way to make a profit flipping houses is to start with a business plan.
Flipping Mistake #5: Overpricing the Home
Ultimately, the realtor that you choose to work with when you’re ready to sell your find and flip property can only advise you on how much to list the property for.The ultimate pricing decision is yours. However, it’s important that you don’t become so personally attached to the property that you overprice it when it’s completed.
During the course of your time working on the fix and flip, you will see how much the property is improved. It’s easy to become sentimental and overvalue the property.
Make sure that you’re really listening to the realtor who provides comparable sales within the given area. If you overprice the home, your find and flip project will take much longer to sell — and eat into your potential profit.
The Bottom Line
It looks so easy! At any given time, a half-dozen shows on television feature good-looking, well-dressed investors who make the flipping process look fast, fun, and profitable. But making a nice profit quickly by flipping a home is not as easy as it looks on TV or social media. Novice flippers can underestimate the time or money required and overestimate their skills and knowledge. If you are thinking about flipping a house, make sure you understand what it takes and the risks involved.
About Michael Forkas: Michael Forkas is not your typical real estate agent. After building a successful real estate development company, he pivoted his career to provide unmatched service to homeowners. Michael stands by his promise: "Your Home SOLD Guaranteed or I'll Buy it at a Price YOU Agree to!" He won't sell you a home he wouldn't buy himself, ensuring a trademarked approach that guarantees satisfaction and success.