10 Things to Be Aware of Before Flipping Homes

10 Things to know before flipping homes
Popular television programs make fixing and flipping homes look like a fun way to make a significant profit quickly and easily. But before jumping into the market and tackling a fix-and-flip property, it is essential to consider 10 specific challenges that can make or break the sale.
  1. A Flip is an Investment, Not a Home
When buying property, it’s easy to become emotionally attached. This is fine if the buyer plans to stay in the home as a primary residence or own it for longer than 12 months. But a property to flip is an investment. Make decisions for improvements/repairs by focusing on budget and ROI (return-on-investment). Home flippers can’t always make design choices based upon personal taste. These decisions need to be based on what’s best for the investment and the ultimate goal — the sale.
  1. The ARV of the Property is Important
The ARV or After Repaired Value is a key factor when flipping a house. U.S. News Money states, “Experienced flippers recommend buying properties in which the ARV is no more than 70 percent of the estimated sales price.” Knowing the ARV of the property is as important as the right buying price.
  1. The Buy Price Can Mean Difference Between Profit and Loss
As a house flipper, the buying price is a critical number. Overspending on the house makes it difficult to break even, let alone make any money. The lower the buy price, the better the opportunity to make a significant profit.
  1. Fix and Flip Loans are Available
It takes money to buy and flip a home. When starting out or when funds are tied up in other investments, a house flipper may need financial assistance. Conventional lenders will not usally offer the type of financing needed to fund a house flipping investment . Look for a lender that helps investors and house flippers with no-hassle underwriting, and solid financing through fix and flip loans so the project can move forward and money can be made.
  1. Location Matters
A house flipper can purchase a property cheap and make it look gorgeous, but it won’t sell for top dollar if the location doesn’t entice buyers. Houses located on busy and/or noisy streets, near railroad tracks, or on a block with boarded up buildings are not prime locations. Buyers want attractive, safe neighborhoods and homes with easy access to amenities, schools, and public transportation.
  1. Know Neighborhood Comps and Trends
If the neighborhood comps had kitchen upgrades that cost around $15,000, the ROI for a full remodel at $25,000 may not be worth it. It pays to know the current design trends and what’s selling in the neighborhood. What are buyers looking for? If granite countertops with a farmhouse sink are the must-haves, design to those particular buyer trends.
  1. Be Aware of All Costs
Buying a house to flip for $100,000, investing $50,000 for repairs/remodeling, and then selling the house for $180,000 doesn’t mean the profit is $30,000. Several cost factors must be considered.
  •         Cost of repairs, overruns, including labor/materials
  •         Soft costs when needed; such as engineering, soils, geo report,property survey,Permits, architectural services and various city fees.
  •         Closing costs, commissions, debt service (The mortgage payments you made while holding the investment), insurance and other miscellaneous fees
  •         Taxes
Unexpected costs like the removal of asbestos, lead paint, or to bring the electric back up to code also add up.
  1. A Solid, Reliable Team is Essential
Every house flipper needs a good, reliable contractor. The contractor helps with the initial evaluation of the home before purchase to let the house flipper know what type of issues the property has and how much it will cost to fix. This helps determine how much to spend on the purchase. Along with a good contractor, round out the team with a talented landscaper and design expert when necessary; especially on the bigger, more sophisticated projects.
  1. Professional or DIY Skills Save Money
Investopedia states, “The real money in house flipping comes from sweat equity.” Any time the house flipper can do repairs, the overall costs lower, increasing the profit margin. However, never overestimate DIY skills, because if the job is done poorly or incorrectly, a pro has to be hired and now the savings (and time) has been lost. Also as you start growing you want to keep in mind in order to further grow you need to be in a position to work on your business vs being stuck  working in your business.
  1. Realistic Timelines Keep Costs Down
Expect it to take time to get all permits and inspections complete, but follow up to ensure everything is processed without delays. Planning and sticking to a timeline is essential to stay on budget and keep costs low. Money can be made flipping houses. “Homes flipped in the first quarter of 2016 yielded an average gross profit of $58,250, the highest average gross flipping profit since the fourth quarter of 2005,” reports Marketwatch. When ready to flip that first or 50th home, look to Aztec Financial for affordable Fix & Flip Loans and for the help needed to realize your dream and achieve real financial freedom.
  • “I’ve been a Real estate Broker and Investor for over 15 years. Aztec Financial has provided funding for several of my projects. The most important factors and services a private party lender can provide is timely funding and flexibility in structure. Aztec has never failed to fund my deals once a loan commitment has been issued. This gives me confidence to know once I make an offer, I can close the deal. The staff is overwhelmingly courteous to help you through the entire process, from execution of loan documents, servicing of the loan, timely inspections and the closing of your transaction. If you are a real estate investor looking for fast, flexible funding, I highly recommend Aztec Financial as your go to lender!”

    – Kenneth B.

  • “I have worked with at least 5 of the top private lenders and Aztec Financial has been the best for me, with well over 40 transactions together Joel, Melanie, Kenny and the rest of the team have given me nothing but the best, Top notch quality service, no other private lender has been able to match what Aztec Financial does for me, I highly recommend Them, Sincerely,”

    – Gus I.

  • “Aztec Financial has been my go to lender for the past 19 years. They make it quick and easy without a lot of red tape. They understand the real estate investor and work with you on your goals. I have dealt with many lenders and have to say that the Aztec staff and customer service is also what sets them apart from the rest. ”

    – Austin L.

  • “Aztec Financial not only offers great terms and fair pricing, they also go out of their way to ensure your success while providing great customer service. They are second to none.”

    – George W.

  • “When your offer is accepted it is imperative that your lender is ready and able to respond. My last two transactions were accepted and Aztecs funds were ready to be wired in 48 hours. Aztec has been dependable in funding more than fifty (50) transactions for my company.”

    – Marvin F.