It all sounds so easy, doesn’t it?
Just purchase a house, fix it up here and there to boost the curb appeal, list it back on the market, and enjoy handsome profits. Most shows and advertisements you see online feature well-dressed, professional-looking investors, who make the entire procedure look fun, simple, and quick.
Countless homes are getting fixed and flipped in the United States. According to the statistics provided by ATTOM Data Solutions, flipped houses made up 6.2 percent of total residential property sales just last year in 2019—an 8-year high.
The road to flipping isn’t only about fixing the cosmetic issues, enhancing the curb appeal, and getting a beautiful “sold” signage. There can be many other invisible problems with a well-maintained polished property that keeps the buyers away.
In this blog, we’ve shed light on how fixing and flipping real estate actually work.
How Does Fix-&-Flip Work?
Professionally known as “wholesale real estate investing,” flipping is a type of investment strategy, where the investor buys a residential property, not for personal use, but to improve its condition and sell it further to earn a higher return on investment (ROI).
It’s somewhat like buying gold when the prices are low and selling it when the prices appreciate, but with many other factors involved. The current market price, capital improvements, amenities offered, title, financing, occupants, and taxes—all affect the profit you may derive from the property.
Most wholesale real estate investors prefer keeping the profits earned through flipping houses in circulation. They typically involve multiple flips at a time to maintain a healthy and consistent flow of income.
Where to Begin?
If you’ve decided to flip a residential property, you need to minimize your financial vulnerability and maximize your profit potential. In simpler terms, you don’t want to invest in a house because its price seems pretty low. Conduct a thorough cost-benefit analysis by evaluating all the things you need to fix, whether physical repairs, capital improvements, or legal issues. Gather that information, and based on that, negotiate the price of the house.
We recommend sticking to a 70 percent rule. The rule states that a flipper must not pay anything above 70 percent of the ARV of the house. ARV is the after-repair value or the worth of a home after it’s fixed.
If you’re planning to fix and flip a house offered at a low price, seek advice from Phillip Fehler, a Fathom Realty real estate broker and a leading realtor in Fort Bragg, NC.
Get in touch with us today for a free consultation and valuations for your home in North Carolina.