House Flip Questions To Help You Get Started
Like with any investment, there’s a certain amount of risk involved with fix-and-flip deals. Asking the right house flip questions can make a difference though. Many wonder if they should get involved, invest their time, energy and money in real estate fixer-uppers and if it will all be worth the investment in the end.
The answer is a resounding YES.
When it comes to real estate investments, the pros far outweigh the cons. However, there are items to be aware of before you start applying for funding and fixing and flipping homes. To ensure that fix-and-flip properties are a compatible investment, we outlined six house flip questions you should ask yourself before you cannonball into the REI pool of lucrative investments. Answer all of these questions honestly and you’ll end up with an excellent idea of whether or not flipping is right for you.
No-Hype Guide to House Flipping
1. What Shape Is the Property In?
One major factor to take into consideration is the severity of the property rehab. Does the property need a few cosmetic touch-ups here and there to make it move-in ready or does it require a total upgrade from foundation to roof? Clearly, the more repairs a property requires, the more expensive and the longer the overall rehab will take. The key to a successful fix-and-flip is to perform the rehab as quickly as possible, so it doesn’t end up eating away at your overall profit. This is why good hard money lenders have a maximum rehab amount, to ensure that a project will be completed in the hard money loan’s time frame and won’t go wildly over-budget. In the end, if the rehab costs far outweigh the potential profit, the deal should be kicked to the curb, that is important when learning how to flip a house.
2. Is the Deal Worth the Investment?
Be aware that not all fixer-uppers are great deals! Three major factors help assess a great deal – the property purchase price, the rehab costs and the ARV (after-repair value, or resell price). If you already know the location is ideal and the risk factors are minimal, it is important to research price points. For example, if you can buy a house for $130,000 that requires $35,000 of rehab work and discover the ARV to be $200,000, walk away fast. However, if you can purchase that same home for $90,000 instead with an ARV of $220,000, you’ve got yourself a much better deal.
Fortunately, Do Hard Money provides a fantastic tool called the Advanced Deal Analyzer. This tool can help assess the risk factors of a property, calculate costs and fees and determine the overall net profit for every deal. It’s the quickest way to know whether or not a deal is profitable. If it is, the ADA takes you straight to the loan application page so you can get started right away on your lucrative fix-and-flip deal.
3. Can I Invest the Time?
Fixing and flipping homes requires a solid time investment. You will need to put in some man hours finding the best property. Then, you will need to invest some time in the rehab – multiple visits to the site may be required, plus your attention will be needed to make crucial decisions throughout the rehab process. If you plan on doing some or all of the rehab yourself, plan on putting that social life on hold and calling in sick to your day job for a couple of months. As we mentioned before, the key to fix-and-flip success is to complete the rehab as quickly as possible.
Fortunately, Do Hard Money has a solution for this requirement. Did you know that we provide rehab project managers with every deal we fund? This makes it so if you’re investing in a property that’s in another state or don’t have the time to babysit a rehab, you can rely on a personal project manager to oversee the rehab and ensure the work gets completed on-time and on-budget.
4. Do I Have the Required Skills?
You do need a skill set to become successful at fix-and-flip investments. It’s important to gain knowledge and skills in finding properties, negotiating prices, rehab planning and execution, real estate marketing and reselling strategies, to name a few. Basically, the more you know, the more successful you will be. If you plan on doing some of the smaller rehab projects yourself to save money, it is imperative to assess your construction skills and determine if the projects would be better handed over to a contractor.
Fortunately, Do Hard Money has thought of this, too. We are far more than just a lender. We want every client to become a successful real estate investor, therefore we provide a wide variety of tools, tips and resources to help expand your knowledge and increase your profit with every deal. Taking advantage of our resources will help you become an REI expert in no time!
5. Do I Have the Motivation?
Just as important as having REI skills is having the motivation to see a deal through successfully. The wonderful thing about fix-and-flip investments is the more you put into them, the more you get out of them. Namely, the more time you spend researching real estate investment tips, learning negotiation tactics, gathering data on real estate hot spots, etc., the more prepared and successful you will be with your first deal. There will also be many obstacles that will pop up throughout your fix-and-flip process, and having the motivation to solve problems as quickly as they come up, to be on top of paperwork submissions and work hard every day to find a property and execute its rehab is worth its weight in gold.
Fortunately, you don’t have to do this alone. Do Hard Money has a team of REI experts at your beck and call to provide you with essential tips, customer support and encouragement with your deal to help ensure your motivation and drive don’t fall by the wayside if the going gets tough.
6. Do I Have the Resources?
There aren’t many people who start in the REI game with millions in their bank account. So, odds are you will be in need of funding to purchase a property and rehab it to the nines. Most traditional banks will not fund a fix-and-flip deal, as their loans tend to be longer-term and take a good deal of time to receive the funds. Fix-and-flip properties require fast funding so you can make an offer quickly on a home, and shorter loan terms so the work can get done quickly and the home sold fast, putting your profit in your pocket sooner. You will want to invest in a hard money loan to fund your deal – and the best ones lend on 70% of the ARV and are upfront about all costs involved.
Fortunately, Do Hard Money goes above and beyond the call of duty. The main thing that sets us apart from other hard money lenders is we provide 100% financing for qualifying deals. Basically, if a deal is profitable enough, we will fund 100% of the property purchase price, rehab costs and other costs, with you bringing $0 cash-to-close to the table!
If you’ve pondered these house flip questions and are more jazzed than ever to get started, Do Hard Money is ready to work with you and help you open the door to financial freedom.