How to Fix and Flip Real Estate

Basic Anatomy of a Fix-and-flip Project

Flipping houses is, in principle at least, fairly simple. An investor finds a property that, owing to being outdated or in some level of disrepair, is available for a price significantly below its potential market value. The investor then either executes the repairs or, more commonly, hires contractors to do the work. After the home has received whatever work it needs, it is then resold for a fair market price that covers its original purchase price, the cost of the repairs and a reasonable profit for the investor. Although the actual profit varies on each individual fix-and-flip, the reported average gross return for flippers in 2017 was an impressive 49.8 percent.

How to Find Houses to Flip

Finding the right houses to flip is the most crucial element of success with the fix-and-flip model. Investors who don’t know how to find houses to flip will almost inherently end up paying too much or underestimating the cost of repairs, thus making it difficult for them to turn a profit. To find houses that are suitable for flipping, you need to be able to consistently discover properties that are selling well below the prevailing market price. Foreclosures and houses that have gone unoccupied by their owners for long periods of time are often easy to flip, but finding enough of them to make a reliable income can be difficult. Sellers who are trying to liquidate their homes quickly, such as those who may be moving or are facing financial difficulties, can also be good sources of houses that are ripe for flipping. Generally, searching through properties that are for sale by owner is a good strategy for investors, since these houses aren’t as easy for other investors to search for on the MLS.

How Much Money Does it Cost to Flip Houses?

The actual cost to flip any individual house varies based on several factors. The most important is, of course, the cumulative cost of purchasing and repairing a given distressed property. Also of central importance to the cost of a project is how you’re choosing to finance it. Established real estate investors may be able to pay for fix-and-flip projects out of pocket, though relatively few choose to do so. For most flips, especially those undertaken by first-time investors, some form of financing will be involved. When a house is financed, the investment in the project is the total of the down payment, the cost of the financing and the cost of repairs.

How to Flip Real Estate With no Money

Input costs that can run into the tens of thousands of dollars are all well and good for established investors. People who don’t have that kind of capital, however, often wonder about how to flip real estate with no money. In truth, there’s no way to do a fix-and-flip project with no money at all. What you can do, however, is do it without using any of your money. Putting together capital is one of the most important skills for a real estate investor, and it’s a good idea to develop it early on. Sourcing money from private partners or hard money lenders is a great way to fund a project without using your own capital. If you find the right property and can demonstrate that the numbers in the deal make good sense from a profit perspective, you will likely be able to secure money from private sources for it. Be aware, however, that not having your own money in the project doesn’t release you from the risk involved in the investment. Whether the fix-and-flip is a success or not, you’ll still be obligated to repay your creditors.



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