An increasing number of real estate investors are getting into flipping homes, which can be a lucrative business.
5.5% of all homes purchased in the U.S. during 2015 were flips, according to RealtyTrac’s fourth-quarter 2015 statistics. And, 75% of U.S. markets saw an increase in flipped homes during 2015.
RealtyTrac’s Q4 2015 report also reveals that the number of investors who flipped at least one house in 2015 was at its highest level since 2007. And in the Q3 report, RealtyTrac noted that, on average, flippers made a gross flipping profit of about $62,122.
So if you’re a real estate investor and thinking about flipping homes, here are 5 of the top habits that will help you turn a profit.
Location is of utmost importance in real estate, and it is likewise important when finding and purchasing investment property. But research goes far beyond location when flipping a home for a profit.
The best flippers have detailed knowledge regarding the cities and neighborhoods where they flip homes, and the overall real estate market for the area. They understand the market forces at work, and how to purchase a property in specific areas below fair market value, and eventually sell it for a handsome profit.
As a result, profitable home flippers have seen 54% gross profit, on average, for flips in the $100,000 to $200,000 range, partly resulting from research.
#2 Plan: Purchase Price, Rehab Budget, Resell Price, Profit
Successful flippers start with a plan to flip a home and make a profit. Their plan often includes the purchase price, a budget for the rehab, resell price, and profit after all expenses.
To do this, formulate a ballpark budget for the rehab before buying a property. Have your contractor walk the property with you and estimate the rehab budget. Then, take that number and add for contingences to cover unknowns and overages. Lastly, review local comps to project the resell price, in order to estimate the overall profit for the flip.
At the end of the project, hold yourself accountable for making the projected profit for the flip. And if you fall short of your profit goals, analyze the components of the plan to learn from possible mistakes.
#3 Add Value
Highly profitable flippers add substantial value to homes they flip, and thereby earn higher profits. In 2015 alone, flippers added $55,000 in average value to flipped properties, which is reflected in the ROI of their flips.
When deciding how to add value to a flip, think about what is most important to your target buyers, such as:
- Curb Appeal
- Ceiling Height
- Floor Plan
- Kitchen Size
- Fixtures and Appliances
- Closets and Storage
The more value you can add to a flip, without over improving a property, the more profit you will make.
#4 Think Outside the Box
Some houses only need cosmetic improvements to flip, but others need to be completely renovated.
In general, a flip that needs the most work has the highest potential for profit. Knowing this, flippers bought homes at about 26% below market value in 2015.
Successful home flippers have the ability to look at distressed properties, envisioning the possibilities to improve the home and economically add value, while developing a plan to rehab the property within budget and resell it for top dollar.
The best flippers think outside the box, and have the ability to produce excellent profits by transforming dilapidated properties into highly desirable homes.
#5 Strive for Perfection
The most profitable flippers have a ferocious tenacity in striving for perfection, producing an outstanding home for buyers while also making a healthy profit. They are smart business people who systemize their projects, use the best contractors and industry experts, and hold their team accountable.
A real estate investor’s ability to generate profits is dependent on staying organized, meeting deadlines, and ensuring that every detail is carried through to the end.
Graystone Investment Group
Graystone Investment Group is a real estate wholesaler. We have researched the Tampa Bay area neighborhood-by-neighborhood to determine where investments are likely to have the most most return on capital.
Unlike other wholesaling groups, we find properties that we resell to investors at discount prices, while also connecting them with private financing. We also coordinate with rehab and management companies we’ve worked with for years, at no extra charge.