So, you are ready to buy a home and flip it for profit. It sounds like a great investment idea. After all, there are countless television shows that are dedicated to the pros who make hundreds of thousands of dollars in this industry. However, it isn’t always that simple. Sure, if you want to make money when flipping a home, you need to be able to buy for a low price and sell it fast for a high price; but there is more to it than that.
If you want to make the most money possible on your home flip, here are a few things to consider.
- Don’t go too big. Your first flip should never be too big. You may think this is the best way to make the most money, but many times, the highest profits actually come from smaller homes. Besides, if you lose big on your first flip it’s going to impact the rest of your flipping career. If you make even a small profit, you have something to put into your next flip and can build your business from there.
- Find the right crew. The contractors working on your flip are going to make all of the difference in how much money you can make. If they know what they’re doing, you are going to pay less to fix mistakes and trust us, buyers are going to want to pay for quality workmanship.
- Use ARVs. The After Repair Value or ARV of a home is a great tool for you to use. This is the estimated cost, based on comps, that the home should sell for once it is renovated. If you want to figure out your max purchase price for a renovation, multiply the ARV by 80% then subtract the renovation cost to figure out your purchase price. Once you have that max number, stick with it.
- Don’t forget about holding costs. If you are financing a flip, you need to remember holding costs that include mortgage payments, utilities, HOA fees and landscaping maintenance. They should all be factored into your budget. Just make sure you have enough cash to cover it all.
- Always look for an up and coming neighborhood. Do your research, this is always the type of area where you can make the most money on a flip.
- Choose the right hard money lender. Not all private lenders are created equal. Taking the time to search for and find the right hard money lender can make all of the difference in how your financing goes through and how much money you can make when it is all said and done.
- Get the home inspected before you buy. Sure, it is an upfront fee, but it is something that can help you avoid a mistake that could cost you thousands.
Keep these tips in mind if you are serious about flipping a home and want to make sure that you are making as much money as possible on this venture. There are many people out there that try to fix and flip houses and end up losing a great deal of money on their endeavor. Avoid these mistakes and keep these tips in mind so you can make the most on your next investment.