First Time Flipper? Focus On These Five Crucial Areas

There is a lot that goes into completing a successful fix and flip rehab deal. The process is magnified if you are just breaking into the business. You will worry and stress about everything and will often be apprehensive pulling the trigger when a new deal comes your way. Eventually you will find one that checks all the boxes and the real work begins. Instead of focusing on items that don’t do much to your bottom line there are a handful of crucial areas you should focus on. These core items will often determine your profits, and just how smooth the project is. Whether you are an experienced veteran or a first-time flipper here are five crucial areas you need to focus on.

• Financing. The starting point of any real estate deal is financing. You can have dreams and visions of how you want your business to go, but without financing it won’t get very far. If fix and flips are your interest you need to start with financing. 99% of all rehab deals are funded by hard or private money. If you have your own personal capital, you are ahead of the game. However, most investors need outside funds to make the deal work. Fortunately, there are more hard and private money investors than ever before. A quick email to your friends and family will probably yield a handful of interested investors. If you strike out there your real estate agent, attorney or networking contacts should be able to lead you to a hard money lender. With more hard money contacts than ever before you can pick and choose the lender you feel most comfortable with that offers the best terms and conditions. Take your time finding the right financing. Your bottom like depends on it.

 

• Location. Instead of focusing solely on price, you are better off choosing the right location. Of course, price is always important but there are times when it can be fool’s gold. A discounted purchase price may be a money pit that you will have a difficult time getting rid of. The better alternative is focusing on a few select markets where you would want to buy. By narrowing your focus, you will become much more familiar with these areas and be more prepared to act when a new opportunity comes your way. You also reduce the chances of getting stuck with a property you can’t sell. It is no secret that location is important in real estate. Buying in better areas may not lead to a home run but you are much less likely to lose your shit. Areas of higher demand give you increased options whether that means doing different work or even renting for a year or two until the market turns. Until you have a better grasp on the business you should focus solely on quality areas and prime locations.

 

• Numbers. If you don’t know the numbers inside and out you will ultimately have a hard time being successful. There are a handful of important numbers in every rehab deal. As we mentioned, the first wave of numbers pertains to the financing. With your financing you need to understand your payment terms, carrying costs and how long the project will take. You also need to make sure all your estimates are on point. The costs of repairs will determine your list price and your potential profits. If you blow your repair budget out of the water you will be forced to either list for more than you know you should or make adjustments to the repairs. It is recommended to bring a contractor or someone you trust to view the property and help construct an estimate.

 

• Do the right updates. All improvements are not created equally. Simply throwing money at a property does not guarantee a return. If you do the wrong work for the property and the market you will be left wondering what happened. Prior to making an offer you need to spend some time researching the market and getting an idea of what buyers want. The right updates with the kitchen or bathroom can help make all the difference. Instead of having a property where buyers are lukewarm you will deliver one that flies off the market. Be careful making updates that you find appealing instead of what works for the market. The more demand you can create the easier your rehab will be to sell.

 

• Expect the unexpected. A rehab never goes as smoothly as you plan in your head. All you need to do is watch one of the many shows in TV to get an idea of just how difficult the process can be. Even though some of the drama is manufactured, there is a lot of truth in many of those scenarios. In every rehab there will always be a point where something doesn’t go as planned or something happens that throws you for a curve. Like most things in life, having capital to address the unexpected makes them easier to deal with. You should always either give yourself a cushion in your budget or have reserves on hand. By taking shortcuts or cutting corners your property won’t end up the way you want it, or the way it needs to sell for top dollar. The unexpected happens in the real estate world more than you think. Have reserves to deal with whatever comes your way.

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There is always a lot to consider on every new rehab deal. Instead of pulling yourself all over the place focus on these five crucial areas.

​On Point Homevestments