- The right area
It’s essential to choose the right area for a property flipping project. The goal is to sell as quickly as possible once the renovations are complete, so it’s advisable to choose a property market that’s moving fast. Prioritize a neighborhood where properties are selling fast to occupiers (instead of investors). Why should you do this? Well, generally speaking, investors are more likely to have a maximum price that they won’t go above. Occupiers are more likely to have an emotional connection to the properties that they are interested in. Essentially, if more than one occupier really wants the property, you’ll end up with a bidding war (that pushes up the price)!
2. The condition of the property
Choosing the right property to flip is an important step, and at this stage, you’ll need to consider the condition of the property. As a property flipping beginner, it may not be a good idea to choose a property that needs extensive renovations. When you’re choosing a property, it can be helpful to have your contractor accompany you to the viewings. Your contractor will be able to give you a good idea of how much work is needed, and how much the work is likely to cost.
- Budget your expenses
Your number one goal is to make as much profit as possible, so you’ll need to create a strict budget of your costs. Your refurb will take up the main part of your budget. You’ll need to have a clear idea of how much you’re going to spend, to balance your expenses against your profit. Create a clear roadmap of exactly which renovations you’ll need, the time-frame, and consider shopping around to get the best prices. When you invest in real estate, your budget is a crucial part of your success strategy. Your budget will also need to include your broker fees, estate agent costs, and solicitors expenses.
- The 70% Rule
Property flippers generally follow the 70% rule to achieve the profits they desire. When you are determining the maximum price you’re willing to pay; this rule states that you shouldn’t pay 70%+ of the ARV (once the repair costs have been taken off). The ARV means ‘after repair value’. Using this rule, you can determine how much you’ll pay while also taking into consideration your refurb expenses.
- The right contractors
Since the refurb is the most important part of property flipping projects, you’ll need to choose the right contractors. Whether you require basic laboring work, land surveying or Under Ground Service Locating, ensure that you conduct thorough research to find top quality services. When you are screening your contractors, it can be helpful to ask for testimonials and references.