What You Should Know About Flipping a Property


House flipping involves the purchase of a residential home and completing extensive renovations. The changes make the property more appealing to buyers and correct any damage caused by the previous owner. Most investors choose foreclosures for their investments when they want to sell the properties quickly. Reviewing what buyers should know about flipping a property helps them prepare for the venture. 

You Must Pay for All Repairs

Most house flippers purchase the properties through an auction. Prior to the auction, the sellers aren’t always allowed to walk through the entire property before submitting a bid. Unfortunately, the lack of an official inspection prevents the buyer from discovering all the problems with the property. They will perform all repairs and bring the property back up to code before selling it. This could increase the cost of the renovations. Since the buyer isn’t living in the property, they cannot get an FHA loan with a renovation allowance. 

The Location of the Property Affects the Housing Market

The location of the property affects its projected value. The prospective buyer should complete a market analysis to calculate the exact value of the property. To complete the assessment, the buyer must review similar properties that recently sold in the same neighborhood. The market value at which the similar properties sold defines how much the buyer can expect to get from the investment property. However, the property must be in the same condition as the other properties and located in the same neighborhood. 

The Property Must Pass an Inspection

When the seller accepts any offers from a buyer, the buyer must schedule a property inspection. The investment property must pass the inspection or the investor must perform more repairs that could lower their profits. It is recommended that the investor schedule their own inspection to find problems that could cause issues with the sale. Property investors can find out more about passing a property inspection if they go to NRIA right now. 

The Buyer Must Research the Property and the Area Thoroughly

Statistics for the neighborhood could define how quickly the property sells. If the locale has a high crime rate, it is less likely that the property will sell as quickly as a home in a more family-friendly location. The investor must complete a full evaluation of the area and the property for potential issues. 

There Aren’t Any Guarantees 

When flipping a property, the investor receives no guarantees, and the property could spend months, if not years, on the market. The investor has several options for selling the property including selling it to another investor. Reviewing their options shows the buyer their best opportunities for getting a return on their investment. Conducting proper research prevents the investor from purchasing a home that isn’t as appealing or that requires too much capital to repair. 

Flipping a home isn’t an exact science, and investors must research the area and the property before investing. Learning more about the property and the investment’s potential helps them make sound decisions. Investors can learn more about financing homes for resale by contacting an advisor right now.