The 'fix and flip' investment strategy is one of several available to real estate investors. While some consider it to be relatively straightforward, it has its complexities as any other business endeavor. If executed poorly, it can lead to much lower returns than expected. In a competitive market where there is a shortage of houses to flip, workers and materials, flipping houses can become more difficult than usual. In this economic environment, investing in a distressed property that meets all the characteristics needed for high returns becomes essential. Furthermore, if you are new to fix and flipping, or if you already have done several, it is good to remember that seeking the help of professionals can make the entire process efficient and beneficial.
In the following paragraphs, we highlight some of the characteristics we think are needed for maximizing your chances of high returns.
You must locate a good market.
Finding homes to flip is a crucial step; it goes without saying; finding a property in a favorable location is the goal. Some factors to be vigilant when doing so include:
- Does the neighborhood have basic amenities and services like schools, parks, hospitals or clinics, public transportation, local stores?
- Is the district known for good water and electricity supply?
- Has the local real estate market been favorable lately?
Other questions that you must answer before selecting your fix and flip project are whether property values are rising is the crime rate low in this area, and are other people investing in renovating their spaces in your chosen vicinity.
Once you locate a good market, become an expert about it. Pinpoint an area where you want to buy, drive the area looking for "For Sale by Owner" properties. Chances are, the home is not in MLS, and you might be the first to contact the buyer. Also, daily lookout for new listings in that pinpointed area. A good friend of ours spent long hours doing just this. He knew the area so well he would know in an instant if a new listing was worth pursuing. He successfully found properties undervalued and reaped the benefit of his hard work and area expertise.
Be knowledgeable about where else you can find distressed properties.
Apart from constantly monitoring the area, other efficient ways of finding distressed properties are to look out for real estate auctions held by the municipal, state, or bank; this helps you achieve a quick buy, excluding the lengthy sale process, and a good deal. REO or real estate owned by banks and financial institutes for sale that were not sold at a foreclosure auction are also properties with potentially attractive profit margins.
Another aspect one must not ignore is that if a home is not listed, it does not mean the owner would not consider selling it. To avoid the foreclosure process, it would be wise to reach out to homeowners directly. It may prove beneficial to allow professionals to help you find a distressed property at a reasonable price in a prime location. Hiring a Real Estate Agent will ensure that you invest in a decent property.
What to avoid when evaluating the purchase of a distressed property
Unless you are a specialist with ample experience, we recommend that you avoid certain conditions in a target property; always inspect these aspects as a rule of thumb.
Structure and sewer
Look out for any structural damages, and this should include ensuring there is no significant wear and tear in the structure. Also, make sure the house has a working, reliable sewerage plan. A distressed property with irreversible damages or faulty sewage should completely be avoided.
It is never enough to stress that a bad neighborhood can be highly damaging for any potential returns you might receive after fixing the property. If the house is surrounded by other distressed homes, do not expect your fix and flip property to be sold at a higher price. Hence, it is pivotal to spend enough time searching for a location that will result in a fix and flip for a profit. It is worth investing in this opportunity cost.
The architecture of the space is also essential to examine, checking there are enough bathrooms, a decent-sized kitchen, and enough storage space. You must always think about the long-term endurance of the property and how much maintenance it will require.
How to finance the property
To compete with other flippers in this tight and growing market, you should always be well prepared, especially when placing an offer for the property. Offering all cash, ensuring you are preapproved for your loan, and showing proof of it in your bid can significantly speed up the transactional process and improve your chances of winning the bidding. You must be clear on how much you are willing to pay to receive a substantial profit and return. Ensure that your margins are not thin and that you will be able to turn a profit (at least on paper).
AMI Lenders is here to finance your next Fix and Flip
The phrase "time is money" is focal in the fix and flip process; flippers require fast cash, and so private lenders with hard money loans are those they must seek. In Houston, there are many hard money investors. However, AMI Lenders provides the best rates for hard money and closes as fast as the law allows.
AMI Lenders is interested not only in helping you finance your Fix and Flip projects swiftly and at the lowest Hard money loan rates available in Houston but also in sharing with you our experience of how to execute your project correctly. AMI Lenders wants their customers to make good of the financial opportunities through real estate investment. Borrowers will be unable to find lower rates than those offered by AMI Lenders for hard money or private loans.
Head over to AMI Lenders; we are here to guide you through it all and help maneuver you through the increasingly competitive market. If you qualify, apply for a fix and flip loan and allow AMI Lenders to assist you.
Visit our website today and fill out an application for a private hard money loan in Houston.
For over 30 years, AMI Lenders have been providing financing options to individuals in the Houston area. If we aren't able to assist you, we'll be happy to direct you to someone who can.
Contact us for any questions or apply online!