In a former post I wrote about seven of the top 14 questions I ask when fixing and flipping real estate. I am eager to continue that conversation with you on this blog!
Remember, the best way to make money through real estate is buying and holding. Here’s the way it works: you buy and hold your first house, and then you buy another house and also rent it. You might even buy and hold a third property if you have the money for down payments and repairs, but eventually, you might start running out of cash. That’s where fixing and flipping real estate comes into the picture. It allows you to make money quickly that you can use as a downpayment to purchase more buy and hold properties (at least that’s what I like to use the revenue for.)
The first question I ask myself before I pursue fixing and flipping over buying and holding is, “Do I NEED the cash?” The second question I ask is “Would this property serve me better short-term as a flipper? Can I make at least $20,000 for every $100,000 I invested? If the answer to both of those questions is yes, then I find myself needing to ask the following questions as well.
Questions to ask when Fixing & Flipping Real Estate
8. Is the property being sold in “as is” condition?
This essentially means that any fixes are up to you. This is okay as long as you understand what you’re doing and know what needs to be fixed. But, you’re taking a little bit of risk. If you purchase a property as is, make sure you get a thorough inspection done.
9. Can I inspect the home prior to closing?
That being said, some people get antsy and purchase a property before they can even see it with their own two eyes. This is dangerous business. Repairs could be impossible or too expensive to be worth it! I see people who buy foreclosures at auctions and they expect to flip them. If you expect to flip a property, you MUST inspect it!
10. Is the average sell time in the neighborhood less than 90 days?
This is a big one. You want to purchase property in desirable areas because it will undoubtedly affect the rate at which you are able to turn around and sell— and, how much you’re able to sell for. You can find the number of days listed by looking on sites like Zillow or asking your realtor directly. Now, people will un-list and re-list their homes to tweak the number, so you have to do your homework thoroughly!
11. Have you confirmed the ‘as repaired’ appraisal?
Some lenders will still do ‘as repaired’ appraisals. Mortgage companies and even the FHA sometimes allow you to set repair money aside to draw from. So, what you’re really looking for is the number on the ‘as repaired’ appraisal. It gives you a realistic gauge for what amount you can sell the house for.
12. Do you have your repair team in place?
If you don’t have a repair team in place, you might find yourself waiting a long time and losing a lot of money. Preemptively decide who your contracting team will be and ensure that they’re available as soon as you purchase the fix and flip.
13. Have you found a good mortgage lender for your buyers?
Sometimes you have to go find the lender for the buyer. That’s right— in some cases, you have to show the buyers HOW to get approved to buy your house. Doing the due diligence to understand how the system works and networking with mortgage lenders will pay off.
14. Have you scheduled open houses that you attend?
When you fix and flip, it is important to understand the things that really appeal to people (sometimes it’s as simple as having fresh cookies in the oven and lighting candles!) Open houses give you the ability to understand what buyers are asking for, and you can learn a lot about what you need to have in your property.
What do you do once you buy the property? It’s important to have a plan to fix the property and make it more desirable. A few things you should consider:
- Design extra space solutions (think closets, cabinets, etc.)
- Convert existing spaces (closet to a bathroom, garage to a bedroom, basement to a living area, etc.) This can really drive up the value and cost of the property!
- Obvious problems that need functional or aesthetic repairs
- Update the colors, floors, tiles, and fixtures. Do your homework and see what the newest design and construction trends are. This is a place to have fun and get creative!
- Create a desirable view AND/OR get rid of undesirable views
- Bring in more light
- Reduce noise
I have much more content to share with you in my book, ‘Strategic Real Estate Investing.’ You can order it HERE. It includes an expanded version of these tips, plus much more exclusive content!