Flipping a home is a real estate investment that could pay off if you make smart decisions. Unfortunately, if you choose the wrong property, you could end up losing money instead of making it. The path to being successful in flipping is determining whether or not a property has the potential to pay off. To help with your assessment, here are a few questions to ask about an investment property you are considering.
What Is Near the Home?
Some flippers start their assessment of a property with the home itself. However, the assessment should start with the neighborhood in which the home is located. No matter how nice the flip turns out, if it is near unsightly and undesirable features, you could have trouble selling it.
Problems to look for in the neighborhood include the level of traffic, power plants, commercial businesses, and factories. A heavily trafficked area and any of the other problems could be a turn off for most buyers.
How Extensive Are the Repairs?
Once you have assessed the neighborhood, you need to start looking at the property. Depending on the extent of the repairs, you might have to pass on the home. Ideally, the home's repairs should be cosmetic only. For instance, you should have to do more than paint, install new flooring, or update the kitchen.
More serious structural problems can increase your renovation budget and eat into your potential profits. For instance, a damaged foundation could cost thousands to repair. Not only will moving forward with the repairs hurt your chances of making a profit, but it can also result in costly delays.
Who Is Your Buyer?
No matter how much flip potential a home has, if you do not understand the market, you could have trouble selling it. You need to understand which types of buyers are more likely to want the home and make sure it meets the standards for that group.
For instance, if you want to attract families, renovating the kitchen to include more counter space could help sell the home. If buyers can picture the kitchen as a family space, they are more likely to make an offer on the home. Even a nicely landscaped backyard could be the key to attracting families.
Your real estate agent can help with narrowing down your options for a flip home. Talk to the agent about your expectations, time, and budget to help with finding the right home.