The following article is a step by step for “Repair and Flip”. There are eight essential components of a Fix and Flip that must be paid close attention to in order to stack the odds in your favor:
1. Assemble your team “in advance” The success of “Fix and Flip” relies on having a prepared and efficient team. It is important, if you want peace of mind, that you get your people together before submitting your offer. Members will consist of an inspector, appraiser, real estate agent, a reliable general contractor who can deliver quality work, and subcontractors such as a roofer, electrician, plumber, landscaper, pool attendant, carpet, tile, granite, kitchen cabinets. , painter etc.
2. Choose the right area Choose in-demand and easily accessible areas where people want to live, close to major cities and highways. Be aware of market conditions in your area. As gas prices continue to rise, people want easy access to everything.
3. Pay the right price To maximize your sales opportunity, look for the price range that has the largest group of buyers. Go to the areas that are in demand and choose the range where the highest percentage of buyers are buying. Once you’ve determined the area and price range, and have your eye on a specific property, it’s time to set the right price to pay. As is commonly said in real estate, “you make your money by getting in.”
Investigate the neighborhood to find out what you are competing with. Look at “active” comparables and their days on the market to see what isn’t selling. Look at the “pending” offsets to see what is selling and look at the closed offsets to establish the value. This will give you an idea of how much the property in question can sell for after repairs. Take that number and subtract what you want to do, be generous :), then subtract repair costs, then subtract cost of sale. What is left will give you a target purchase price.
4. Due Diligence The most important free review; Once your offer is accepted, congratulations, a due diligence or inspection period will follow, usually 7-10 calendar days, please understand that there will only be an inspection period if you requested it and the seller accepted it.
Within that period, you should find out as much as humanly possible about the property in question. Send your inspector, hire an appraiser, get all the bids from contractors and subcontractors, ideally get 2-3 bids. You can never know enough, but if you do your homework right, you’ll get it done just fine!
5. Meet the schedule. You did it!!! All your homework turned out positive and you have made progress. Your heart is beating, your knees are shaking. now we are having fun…
For whatever reason, there isn’t a contractor in the world that has the ability to finish a job when it says it will. Don’t ask why, I don’t know, I’ve just come to accept it.
Keeping work on time is a challenge. Every day costs money, and things always take longer than expected. A good team will help keep things on track, but it’s smart to allow a grace period. Having said this; start pushing from day one and stick to your schedule.
6. Know what to fix and do a good job. Find out what adds value to a property. A large percentage of investors submit low-quality work. Generating a bad product does not help the community or its bottom line. Make sure you deliver a quality product, it may cost more in the end, but that cost will be easily recouped in the final sale price. You will sell the property quickly and command a higher price for your investment. The faster you sell, the faster you can move on to your next “Fix and Flip.”
7. Differentiate your property from the rest – Three tasks to attract the attention of the buyer:
1. Showcase Curb Appeal – When buyers walk up and see the property for the first time, their reaction should be, “Wow, this looks great.”
2. When they open the door, another “Wow”, for the quality of the work you just did.
3. Price of the property in the market. After all is said and done, never forget, price is the most important factor if you want a quick sale.
8. Multiple Exit Strategies Understanding general market trends is vital in choosing your exit strategies. The market will determine much of what your strategies will be. I think it’s prudent to have two backup plans. If you don’t make money now, you will make more money later.
Here’s an example:
1. Prime Exit Plan – Sell it outright for the best price.
2. Plan B – Sell at a discount and still make some money.
3. Plan C – Sell through a short-term lease option (6 months).
4. Plan D – Rent it long term until the market allows you to sell it for a lot of money.
Before you secure a deal, make sure you can keep at least two, if not three, exit strategy options.
In my experience, in a good market, the “Fix and Flip”, when done correctly and on schedule, can be completed in about four months, so in theory it can be flipped three times a year. Your ideal time frame looks like this: 2-3 weeks to close, 2-3 weeks to fix, 6 weeks to receive an offer – this is where it pays to do a good job and position your property correctly, and 4 weeks to close the sale. Think about it, once you’ve mastered the art of analyzing the deal, producing quality work, and staying on schedule, your bank balance will start to grow, and so will you!
