Real estate can be a great long-term investment because most properties tend to appreciate in value over time. But if you’re looking to make some short-term profits, a fix and flip investment is the way to go. If you’re planning on doing fix and flips—as a career or as a side hustle—here are 7 important tips that’ll help you succeed.
Do Lots of Market Research
Market research is the key to success in any real estate venture. The main goal of a fix and flip is to boost the value of a cheap property so you can turn a profit, but how much you’re able to boost the value often depends on which neighborhood the property is in. If you’re buying a home in a cheap neighborhood that has low home values, with little chance of redevelopment or any near-future increase in home prices, then you’re probably not going to be able to boost the value by much.
Use home listing websites to see the going rates of homes in the neighborhood you wish to buy. These prices will give you a better idea of how much you might be able to increase the value.
Get Local Financing
Fix and flip homes require a different kind of financing than the traditional mortgage. Most banks and financial institutions won’t offer short-term mortgage loans because they aren’t able to make very much money on interest from these loans. You’ll have to seek out hard money loans, which have higher interest rates but enable you to pay them off in 1 or 2 years. Hard money loans are also advantageous because they don’t take very long for approval, so you can quickly get financing for a new find before the property gets snatched off the market.
To get a hard money loan, you typically have to borrow from a local lender (so if you lived in San Diego, for example, you’d want to do a quick online search for: hard money lenders San Diego).
Find Historic Homes
One of the most lucrative types of fix and flip projects is a historic home. All across America, there are thousands of homes from the 1880s through the turn of the century that have beautiful historic architecture, but are very run down. If properly fixed up, these homes could dramatically increase in value and make you a substantial profit.
Consider Vacation Rentals
Vacation rentals are hotter than ever, thanks to a plethora of trusted vacation rental websites like Airbnb. Most fix and flip investors sell the property as soon as its renovated so they can pay off the hard money loan. But if you have a successful year and you’re able to handle one of your loans without making a sale, then you might consider keeping one of your properties and using it as a vacation rental. A vacation rental can give you a steady passive income that will provide you with significant pocket cash or savings.
Learn How to Do Basic Home Improvement Tasks
The hardest part about doing a fix and flip is renovating the home without spending too much money. Learn how to do basic home improvement chores on your own, like painting, resurfacing, and door replacement.
Find the Right Contractors
When you’ve done as much work as you can with your own bare hands, hire contractors to do the harder work, like roof maintenance or electrical work. Try and find contractors that will give you the best possible service at the lowest possible price—don’t bother with over-priced luxury home contractors. And once your project is done, keep these contacts handy so you can hire them for future renovation projects.
Enlist a Realtor
Many fix and flip investors underestimate how difficult it is to sell a home. After you’ve renovated a home, it’s important that you sell it as soon as possible so you can get money to pay off your hard money loan. Enlist a professional realtor to help you so you can get your home sold fast.
Now you’re ready to get started in fix and flip investing. Best of luck!