Nice title, if only it was that easy. I’m one of those people who believes in lists and step-by-step instructions. I have been an active investor in real estate for over 20 years, as well as a producer of educational materials and seminars, a columnist, an instructor and expert on real estate. I’ve found that if my students have a step-by-step process to follow, learning is easier and success is more likely.
With that being said here is an example of some steps you need to take when looking at quick turning or flipping a property for profit.
Utilize the resources of a professional. A couple of weeks ago I talked about how valuable a professional can be in your process. If you are a first timer you are going to need guidance in the areas of finding the right property, making offers, negotiating, securing a mortgage and closing the deal. A professional will also help you identify a neighborhood or market that is primed for flipping.
Plan and start out slow. Don’t get in over your head; there are places to learn by fire, this is not one of them. You might even want to get a partner to start with so that you can gain experience with less risk. Have a clearly defined idea of location and property type you are looking for and stick to it. Also know your strengths and weaknesses in the area of improving the property. One of the exercises we do in the Professional Investor Class is to identify those strengthens and weaknesses up front so you’re more likely not to make a costly mistake. We also talk about where and how to get professionals to fill in the gaps.
Obtain financing. This is something that can’t wait until you’ve found a property; this must be done ahead of time. Once you know where and what kind of property you are looking for you will have a price range for financing. When I started investing and flipping properties, financing was easier than it is now. I also started by stepping up. What that means is that I would purchase a property as my residence, then get to a point where I could purchase another “residence” and convert the first one into a rental. This was a great way of getting started, because it’s typically easier to get a loan for a residence than an investment property. With that being said, there are also more options now for financing than when I stated, but qualifying is more difficult if you are self-employed or own a business.
Fix-up – This can be one of the most difficult areas to judge and plan for and one of the most costly if you don’t. Part of this process is understanding what will create good resale appeal for the neighborhood. Look at other properties in the neighborhood and make a list of the amenities that are common. Are the garages attached, detached or just carports? Are there front porches and/or back decks? Are kitchens basic or gourmet? Don’t over improve; very rarely will you get your money back. You never want to fix-up a property to be the best in the neighborhood. Fix it up to be above average and current, that is what will attract a retail buyer.
Set the Stage – This is partly a function of fix-up and staging. From the fix-up perspective use neutral colors that are warm but easy to decorate around. Curb appeal, the kitchen and the master are the biggest attention getters. When staging or having the property staged (Add it to your budget, it’s very important), don’t make it cluttered or too personal. The potential buyers need to visualize themselves living there and making it their own.
Keep your real estate agent in your process. Your agent can help guide you and also be prepared to market your property when it’s ready. By keeping them in the loop they can better highlight all the improvements you’ve made.
Still time to be part of this summers Professional Real Estate Investor Class (please add link).
Diana D. Hill