How To Successfully Flip A Home, Every Time
Brantford has become a top city for real estate investors looking to capitalize on the active local market. Let us show you the math behind a successful flip project to help you maximize your profits at each step and win big!
A successful flip project is all about math. Here is the basic equation of a flip:
Profit = Sale Price - Purchase Price - Renovations - Costs
To maximize the profits we need to:
Buy the home for as low as we can
Sell the home for as high as we can
Be as efficient as possible with renovations
Have a good plan and stick to it in order to keep all of our costs in check
Let’s go deeper into each part of the equation to learn how to win.
The Purchase Price
Buying a home below market value can be challenging in a busy market but it’s the best way to ensure a profitable project. Make sure to do your research on the asking prices and sale prices in neighbourhoods you are interested in before making a purchase. Pro tip- Look back on 1 to 2 years of home sales in that area to get an idea of any trends; this information will be key when not only making an offer but also designing a budget for your flip and coming up with a sale price that maximizes your profits.
Here are a few tips to find a diamond in the rough- Keep your eyes open for off-market properties or go after them by putting out wanted ads or even knocking on doors to speak to the homeowner directly. Also, the homes that are in need of extra work may make the project too much for the average flipper and may give you the biggest return on your investment. Tax sales and auctions also offer properties, usually in need of fixing up, at significantly under market value. And of course, a great realtor who knows the market and can get you early access- before a potential bidding war- to premium renovation projects.
The Sale Price
The next most important number is the future sale price- what you can potentially sell your flip for when it’s done. This involves more research, but this time on the highest sale prices in the area as well as the features, finishes, and amenities your buyer will pay a premium for. This will help you to achieve the best return on investment for your project. Here’s a quick tip for those who are new to flipping homes: Be careful not to over-improve a property for its area. Use materials and design to match what is selling- Don’t make the home too pricey for the area that it is in.
Estimating renovation costs and completing projects on-budget is one of the hardest parts of completing a successful flip project. Experience is an asset, so consider a partnership with an experienced contractor or someone who has been flipping homes successfully already. Some other tips to consider are using your own elbow grease. Doing your own work such as demolition, rough finishes and cleaning up the site will all add up on your bottom line. Complete work that makes sense to a potential buyer, not for you, and don’t over-improve the home for the neighbourhood. Remember- when completed, the home will be going on the market to be sold, so be selective with materials and upgrades.
The Soft Costs
The expenses on a flip project can really add up. It’s important to understand the three big cost areas in addition to your renovations. There are costs associated with buying and closing the property such as mortgage and legal fees, appraisals, and land transfer tax. Ongoing costs for every month you own the property include taxes, utilities, insurance, and interest. Finally, there are costs associated with selling the property that may include final finishing, staging, marketing, and closing costs. Be sure to include these in your budget so there are no surprises at closing!
My best advice if you are new to investment properties is to partner with an experienced flipper for your first few projects before you take one on by yourself. If you are interested in partnering with our team of experienced professionals, call or text 226-290-8280.