As with any industry, there are several do’s and don’ts when it comes to rehabbing a house and selling it for profit. The housing market may be on the rebound, but there are still pitfalls to avoid left and right. Use hard money loans to your advantage and start flipping like a PRO. Follow our best house flipping strategies and turn a mess of bricks into a pile of cash.
1. HOW TO FIND YOUR DEALS
In real estate, mostly the “profit” is had when you buy the property, since the market values around already dictates the selling price, unless you do something absolutely spectacular at a low cost. So be really sure that you really get a good deal when you buy a property. Look for houses that are at least 30 to 40 percent below market value, ideally more than 50% below market value, giving you more room to make a good profit. A house might sell for below market value if the seller is extremely motivated to sell, the house is dilapidated, or there’s a shortage of buyers in the area. Many times you can find great deals that are not even on the market yet, but are very likely to be there soon by looking at various databases and having a wide network of contacts that can alert you about a possible deal. Another great way is to go to realtytrac.com, http://www.hudforeclosed.com/, www.hubzu.com or similar to pick up great foreclosed properties. To make this even better, you can use hard money loans to dramatically increase the ROI on your own funds. If you put in 100% of your own money, you might do an 74% profit, but if you borrow 50% the ROI on your own funds will be a whopping 144%, plus you yourself take a smaller risk. Don’t forget to account for the cost of repairs. Take a look at Real Estate’s Tips for Choosing the Best Investment Property for more buying tips.
2. LOOK AHEAD
Housing prices are always changing. You don’t want to get into the rehab business when the odds aren’t in your favor. According to US Money News, housing prices are expected to increase over the next two years with the national median existing home price rising about 4 percent every year. Get up to date on the changing economy and your local real estate market before you get into the flipping industry so you can get the most out of it. However, there is always money to be made in real estate regardless of the economy. Especially in niche markets, which we will talk about later in another blog about how you can find great niche markets.
3. FACTOR IN TAXES
Many people rush into hard money mortgages and real estate investmetns without considering the taxes for fixing and flipping property. If you make a profit on your rehab project, it will be taxed just like any other form of income. The faster you flip your investment, the higher it will be taxed. Thus, the less profit you make. Go to Bank Rate for more information on the tax consequences of flipping real estate
4. MULTIPLE EXIT STRATEGIES
You never know when the real estate market will crash or when your property turns out to be a “dud.” Changing neighborhoods and higher interest rates can deter buyers from buying a home. Don’t simply count on your ability to buy, fix and sell. You might have to sit on your investment for several years, though the average “flipper” in the USA was sold on average of 187 days last year. Bigger Pockets (http://www.biggerpockets.com/renewsblog/2014/02/23/5-exit-strategies-for-success/) has some expert advice for what to do when flipping does not go the way you want it to go. Either way, either exit strategy you pick Lima One Capital have you covered with hard loans for almost any situation you might be in.
As one of the best hard money lenders on the market today, Lima One Capital has a really wide range of hard money loans and hard money mortgages to help you buy, fix and flip your way to success. From fix and flip strategies to fix to rent investments, Lima One Capital can help you do it all. Contact us today!