House Flipping: How to Find the Right Property to Flip for Profit
Over the past decade property flipping has become more and more popular with investors who want to make some quick cash. The idea behind flipping is to buy properties at greatly reduced prices, fix them up and then quickly sell them at or above market value. Estate-sale homes, older homes that are outdated or damaged, and homes facing foreclosure are all potential gold mines for both new and experienced flippers.
The biggest problem that all, but particularly novice, flippers face is that they may not get back a good return on their investment. Many investors try too hard to make the investment property look as upscale as possible and overspend on materials and renovations, making it nearly impossible to make a profit. Others lose their profit before the renovation process even begins because they neglect to properly inspect the home before purchasing it.
If you are thinking of buying a fixer-upper to restore, either to flip or to live in yourself, it is always best to get the advice of a professional. A building contractor, architect or a knowledgeable friend that can to help to determine the condition of the house and the magnitude of work involved in restoring it.
Look for signs of structural damage or weaknesses.
- Floors pulling away from exterior walls, broken lintels (load bearing supports at the top of door frames) large cracks in basement floors/walls and crumbling mortar can all be signs of potential structural damage.
- Check crawl space and basement beams for small piles of dust or any signs of boring. These can be signs of termites and other insects that can cause structural damage.
- Check all wood siding, sills and rafters for any signs of rot.
A sound roof is important because deterioration means that not only will the roof have to be replaced, but that water may have already caused some damage to the framing, wiring and insulation.
- If it is possible, check the condition of the roof from both inside the attic and on the roof itself. Pay attention to spots that are most vulnerable to water damage such as around the chimney and the valleys of the roof. Check to make sure that all flashing is still tight and shows no signs of corrosion.
- Check the plumbing to make sure that the pipes are functioning properly and that there is adequate water flow and pressure.
- Check all fixtures, drains and toilets to see that they drain properly.
- Look for water spots around plumbing as well as on the ceilings under bathrooms.
It is always best to hire a professional to inspect the wiring in a home before you buy, but there are a few things to look for yourself.
- Test all receptacles and light switches to make sure that they work.
- Check any visible wires in basements and attics for frays.
- Check for any scorch marks on receptacle plates.
Flipping for profit is a business and not a personal project, so the most important thing to remember when renovating an investment property is, do not get emotionally attached.
- Unless you plan on living in the home, all cabinetry, fixtures, flooring and paint colors should be kept neutral. A clean, neutral look will appeal more to the masses than a home decorated in a specific style or with a specific color scheme.
- When renovating a house to flip, it is important to be realistic. For example, don`t use building materials like marble and granite to renovate a home in a neighborhood where in order to recoup the cost, the house will have to be overpriced. Doing this can result in the home staying on the market too long, the investor having to make multiple mortgage payments and possibly lowering the price considerably in order to sell the property.
Doing the Work Yourself
The restoration work on flip properties is generally done by the property owner and hired subcontractors. The more work you can do yourself, the more satisfaction you will have when the job is complete, but the job could take twice as long as planned and decrease potential income.
Painting and minor carpentry work can be done by almost anyone with professional-looking results, but for more complex tasks such as the installation of new plumbing and electrical wiring, professionals should be hired.