See you on the Flip Side!
If you are looking at doing a quick flip, you have to know the Market!
In an upward market you can invest more than you would in a downward market.
I’ll work in percentages. I expect to get at least 20% - 25% return on my flip.
Working backwards, if you expect to sell your reno’d house for $2M in a flat market, you can buy the house for $1.2M spend $250K fixing it up & use $50K for misc. (mortgage, insurance, utilities etc.) Total investment is $1.50M, which is 75% of the estimated resale value.
In an increasing market, you can invest a maximum of $1.6M, or 80% of the $2M
In a decreasing market, you can invest a maximum of only $1.3M, or 65% of the re-sale value.
After you determine what you can invest in a property, adjust the price accordingly.
Know your limit & play within it!
As you can see, it looks as if the profit is greater in a declining market, however you can never tell what the true market value is and we want to have a buffer incase it sells for less than the expected $2M. By adjusting your investment down to 65%, you increase your flexibility on the price and reduce your exposure to risk.
You can make money flipping in any market. If you see an area with recently reduced prices, this may indicate the market is softening, but this may also indicate a great buying opportunity.
I have developed a Property Score Card to help determine the hidden potential of homes which include specifics regarding the property, but also economic influences in the area. Using the score card along with my Profit Projector, we can determine what kind of lift you should have once the renovations are completed.
Of course I could give you a renovation and resale consultation which includes a list of local contractors.
I would also advise that you are flexible in what you do with the property. I’ve renovated for a flip, it didn’t sell, so we rented it out until we were ready to put it back on the market. If we were in a position where we had to sell, then our profit margin would have been lower. Having options with a property is always a good thing!