You’ve seen the TV shows: Individual finds a foreclosed home in the best neighborhood in town, scoops up said property for a steal, fixes it up, and sells it for a significant profit. What those DIY and home improvement shows don’t necessarily show you is just how tough flipping houses for a profit can actually be.
But professional real estate investors have insights that can be helpful to just about anyone who’s looking to buy or sell a home. Here are the six secrets investors know that you can apply to your own real estate purchase(s).
1. Location always rules
It’s the age-old real estate adage: Location, Location, Location. Location matters for both buyers and flippers alike. Location is one of the most important criteria when buying a home and the best homes that sell for the most money and quickly are those that are located in areas where people want to live. If you’re hesitating in buying a home because of a locational factor — it backs up to a freeway or power lines for instance — don’t buy it. Down the line, other buyers will hesitate for the same reason.
2. Consider resale as you go
Of course you want to put your own stamp on your new home, but you should also avoid superpersonalized design choices. While you may love green carpet, most potential buyers will prefer a more neutral palette and it’s important that you consider how changes will impact your homes resale value. In addition, don’t overinvest in upgrades and avoid over-improving your home. Flippers make a conscious decision not to “overupdate” their homes (for instance, adding marble tile when the comps all have ceramic). As a buyer you should also consider your comps (otherwise known as your neighbors’ homes) when renovating your space.
Consider the upgrades and fixes that will be attractive to buyers who want to be in your neighborhood. For instance, in some neighborhoods, vinyl flooring and laminate counter tops are fine, while in another this is taboo.
3. Aim for instant equity
Investors work to buy homes below market value — they need to be well-underpriced (like a foreclosure) so the flippers have immediate equity. This allows flippers to quickly make repairs and sell without having to wait for the market to catch up to the price they want.
Homebuyers can adapt this rule for their own buying strategy. While it’s not easy to find a desirable house that’s significantly underpriced — and if you do, it’s probably not one you’d want to live in while you’re fixing it up — but you can aim to buy a lower-priced home in the neighborhood you want, live in it and make modest repairs, and then sell it years later for a profit. By that time, the market value should surpass your purchase price plus improvement expenditures.
4. Be diligent with inspections
Surprises usually aren’t happy news for investors. A home may look OK on the surface, but professional flippers know that problems can lurk beneath what you see. Thorough inspections are key to help minimize fix-up costs — and make sure you know exactly what you’re getting into so that you can plan your budget accordingly. These inspections are essential to understanding the difference between a cosmetic fixer-upper and a serious rehab.
The same rule applies to homebuyers. When your HVAC or plumbing breaks unexpectedly because problems weren’t pointed out during an inspection, you might have to save up more cash before you can afford to make the cosmetic fixes you’d planned when you submitted the offer.
5. Have a backup plan
In other words: Always consider the worst-case scenario. For investors, the goal is to buy, renovate, and sell, but what if the listing just sits on the market and those dreaded “carry costs” start to add up? Sometimes a change of course is necessary when the local real estate market is soft and it doesn’t make financial sense to list your home for sale. Then what? If the entire market turned around and no more homes were selling, ask yourself, ‘Could I lease this property and make a monthly profit?’. A long-term exit strategy should be considered with any investment.
6. Hire professionals
When it comes to home repairs, the old saying “You get what you pay for” rings true. Home improvements and upgrades affect both your enjoyment of your new home while you live in it and also your ability to sell it quickly (and at a good price) when you’re ready to move on.
Seasoned professionals are worth their weight in gold. When selling a home, your goal is to maximize perceived value, so craftsmanship is important. Surround yourself with professionals. Get multiple bids and hire the person that seems to be the best for the job and most realistic — not the most expensive. If you’re like most you’ve probably learned from experience that the cheapest bid never does the best work, and the most expensive just costs more. Remember, good work is not cheap and cheap work is not good. Your real estate agent is a good source for referrals and can assist in directing you to a skilled, competent, professional capable of performing the work at a competitive rate.
If you, or someone you know is considering Buying or Selling a Home in Columbus, Ohio please contact The Opland Group. We offer professional real estate advice and look forward to helping you achieve your real estate goals!
The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in; Bexley 43209 Columbus 43201 43206 43214 43215 Delaware 43015 Dublin 43016 43017 Gahanna 43219 43230 Grandview Heights 43212 Hilliard 43026 Lewis Center 43035 New Albany 43054 Pickerington Powell 43065 Upper Arlington 43220 43221 Westerville 43081 43082 Worthington 43235