Mainstream house-flipping shows have made it widely-popular to buy fix and flips and make money through them. However, the truth is you can’t make quick money in real estate through fix and flips without pouring your heart and soul into the property.
Real estate investors are constantly looking for properties to flip, and it so happens that a lot of foreclosed homes come in distressed conditions due to negligence during the long period they had stayed vacant for.
After going through the entire process of finding foreclosed homes, and finalizing the sale of the property, the hard part begins: the more you have information about what happens next, the less agonized and troubled you’ll feel if you hit a road block. Fix and flips are one of the real estate investment strategies that gained popularity among real estate investors. Many contractors are utilizing this real estate investment strategy to make money. Combining foreclosed homes with fix and flips maximizes the profit that can be made through the property.
How can you prepare yourself to fix and flip foreclosed homes?
Haven’t we all seen enough makeover shows? Whether in fashion or real estate, the entire idea of making something neglected and somewhat ugly into a beautiful thing can be satisfying beyond limits. It’s about seeing the potential and bringing it closer to what it can be through simple steps. Here are a few pointers to keep in mind when fix and flipping foreclosed homes:
Gather information
Buying foreclosed homes requires real estate investors to educate themselves with many aspects of real estate investing including financing investment properties and intensive knowledge of the local housing market. Real estate investors are expected to have knowledge in the following before jumping on the bandwagon:
- Research the local areas and neighborhoods surrounding foreclosed homes to see what kind of properties dominate and what type of properties would sell fast in such areas.
- Negotiate with everyone. Negotiating is essential to cutting costs in fix and flips. Real estate investors must become expert negotiators to ensure they are getting the lowest possible price for everything, including the property contracting services, handymen, or anything involved in the process.
- Gather as much information as you can about financing investment properties. To consider buying foreclosures, you will need to get your financial matters in order. Find the best way to finance your foreclosure home purchase while maximizing the profit at the end of the flip. Financing options include remortgaging a current asset or even getting a home equity line of credit on another property.
- Learn all you can about house-flipping and foreclosed homes. This can help focus your goals into what can bring you value when taking on a short-term investment strategy.
Related: How to Strike the Best Real Estate Deals When Buying a Foreclosed Home
Consider a real estate investment partner
Fixing and flipping foreclosed homes is a job tailor-made for two. Having real estate investment partners to help you through the messy world of fix and flips can tremendously support you in navigating through the challenges that arise along the way. Many beginner real estate investors who are venturing into fix and flips either partner up with a more experienced investor or use expert real estate investors and house flippers as mentors for a financial incentive. By offering the mentor a financial incentive, it guarantees you that he/she will give you information and help you identify problems and solve them.
Build a real estate investment network
This may seem simple and easy to list but not easy to attain in reality. Building a real estate investment network involves many parties as listed below:
- A credit advisor or mortgage broker.
- An attorney specialized in real estate dealings.
- An accountant to manage your books.
- A trusted contractor.
- A property appraiser.
- A real estate agent.
- A property inspector.
- An insurance agent.
- A title company or agent.
This list includes real estate professionals you will need from the infancy of your real estate idea to closing the deal. You may say that it’s excessive to contact all those professionals for each investment, but each one plays a role in insuring you don’t get too deep into trouble especially when it comes to foreclosed homes. Additionally, building a relationship with one professional is better than hiring different ones for each project. Take a contractor as an example: hiring one contractor for multiple jobs means that he/she will give you the best possible price for each job done as it would be known that you will come back to him/her for any contracting business.
Related: Build the Dream Real Estate Investment Network in No Time
Know what you need to do to improve value
Improving value sits at the core of conducting a successful fix and flip. A big part of real estate investors job when venturing into flipping foreclosed homes is knowing what tasks to assign to a contractor and what tasks you can complete yourself successfully. If you haven’t got the experience in building and home improvement, it’s better to let the contractor take over to give you the best results.
Major decisions must be taken with serious thinking. The only improvement projects you should perform are the ones that would bring you a return on your investment; otherwise, don’t add anything for aesthetics. Important parts to renovate to add value may include to update the flooring, renew the kitchen, install new appliances, and even put new windows. You will need to assess the condition of the property and its components.
Stick to your renovation budget
Setting a budget for your fix and flip is crucial to the viability of your investment. You must factor in all the costs of the property while making sure what needs to be done is getting done. Many inexperienced real estate investors go for fix and flips and go overbudget and end up lowering their asking price to move the property. Real estate investors must think three steps ahead.
Conduct a comparative market analysis
Conducting a comparative market analysis can help you as a real estate investor when buying an investment property and again when selling it. Before listing foreclosed homes for sale, real estate investors can conduct a market analysis to find out real estate comps for the property which can help in knowing the actual market value of the said property. Consider using Mashvisor’s investment property calculator as it offers all you need to properly evaluate your real estate property’s value.
Related: The Real Estate Market Analysis Tools That Every Real Estate Investor Needs
List your property
Some real estate investors may choose to hold foreclosed homes and use them as income properties. It’s up to the real estate investor to utilize his/her investment properties to make the best real estate investments. Real estate investment strategies can differ from one investor to another. If an investor chooses to list his/her property, he/she can choose to list the property without a realtor or real estate agent; this can maximize your profit but can delay the property’s sale if you are inexperienced in the selling of real estate. It’s always a good idea to consult with an experienced house flipper to see what works best for him/her.
Buying a foreclosed home to fix and flip is hard work that’s not made for everyone. Real estate investors must be ready to solve their problems as they go, while remaining within a certain budget. Many real estate investors have mastered the art and science of how to invest in real estate with little or no money, and you can too! You must keep your eyes and ears opened and gather as much experience as you can in your first few projects till the work involved with fix and flips comes naturally to you. If you have any more insights about fixing and flipping foreclosed homes, please share them with us in the comments section.
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