In this 6 part series, so far, we have reviewed 5 options for investing in real estate. We’ve attempted to share real estate investment options that are approachable for beginning investors.
Some options, such as investing in REITs, are completely hands off and require zero time or experience to be successful.
Other options, such as wholesaling property or vacation property rentals, are a lot more involved and require knowledge, time, and money to get started.
That brings us to the real estate investment strategy is the single most popular strategy out there. It has been popularized by the sheer volume of shows on HGTV dedicated to it. These expert, veteran real estate investors on TV shows make the strategy of rehabbing and flipping properties look so straightforward, simple and even easy, that it is hard for viewers to not be lured.
But we know better. And that is why we saved the strategy of flipping properties for last.
What is Property Flipping?
Real estate flipping is the process of purchasing a property, residential, multi-family, commercial, or other, renovating the property, and selling it for a profit – usually within a matter of months.
It looks so easy! Buy a house, make a few cosmetic fixes, put it back on the market, and make a killer profit.
And tons of homes are being flipped each year. In fact, according to data ATTOM Data Solutions published in its 2019 U.S. Home Flipping Report, flipped homes accounted for 6.2% of all home sales in the U.S. in 2019, an eight-year high.
Successfully flipping a property comes down to masterfully executing on a few key disciplines we’ll explore here.
1. Buy Right
It’s a standard rule of thumb that you must buy a property and invest no more than 70% of its after market value (ARV). That 70% includes both the purchase price of the property and the renovation costs.
So then, if you know the ARV of a home is going to be $100,000, and you estimate that your renovation costs will come in at around $20,000, then you can’t afford to spend more than $50,000 on purchasing the home. That’s because the $50k + $20k gives you a total spend of $70k – which is 70% of the $100k ARV.
2. Renovate Smart
In order to realize the maximum ARV of a property, smart renovations usually need to be made to optimize the appeal of the home to potential buyers. That means you must have expertise and knowledge around what the current condition of the home is before you buy it and be able to accurately forecast the total cost of renovating it for maximum ROI.
Sure, who would not want a $50,000 garage renovation with California Cabinets shelving and storage space? But should you drop that amount of money in the garage of a home that has a disastrous looking kitchen and tiny bathrooms?
Nope! You have got to know which rooms sell homes and which materials create maximum appeal for minimal cost, so you can come out on top.
3. Sell Fast
Here is another area that requires some expertise. After all the renovations are done, the way to maximize your profit is by selling the property fast. After all, you are incurring costs by the day – so the longer the property sits, the more potential profit is eaten up.
To sell your property fast, you must market it well. That means maximum exposure on all the sites, neighborhood signage, placement in print magazines, available open house times, free bonus gifts to fast buyers.
These are just the highlights you should be aware of before you attempt real estate property flipping.
Whether you’re looking to jump in the exciting game of property flipping or you’re a veteran real estate investor looking to invest in the Baltimore, Maryland area, you shouldn’t make a single move without first talking with the experts of Utz Property Management.
Utz PM specializes in helping real estate investors find, renovate, sell, and landlord real estate in the Maryland area.
If you want help finding, rehabbing and managing properties, don’t wait, schedule a free turnkey discovery session with Jenni Utz today.
Or, you may contact Utz Property Management today at 410.332.4432.