For those looking to make money with little to no elbow grease, flipping distressed properties is a great way to get into real estate. However, it’s easy for inexperienced investors to get bamboozled by properties that are a little too distressed to make a good flip.
I’ve had great success in real estate investing, and my methods typically discourage flips that require significant renovations or upgrades like the “fixer upper” home shows on television. There are several different strategies you can use to find steals and deals on perfectly intact real estate right in your neighborhood; no extreme makeover necessary.
Take risks in your career, but for the best possible reward, store these “red flags” in your memory bank and avoid these particular situations when searching for your next flip.
One of the best ways for investors to find new distressed property leads is by scanning local foreclosure listings and auctions where quick deals are the norm. However, it’s always important to dig in below the surface and learn the story behind the property and its most recent owners.
Doing your homework on the property will give you a glimpse into how much time or money you’ll have to invest directly to make the deal happen. For example, if someone has been forced to leave a home for financial reasons (a typical factor), it’s good to make sure that they weren’t too far behind on necessary repairs to the property. Otherwise, you may end up footing the bill to complete that work before you can flip.
Spotted a property that you think might be a great flip? Research the surrounding area: which homes have been for sale in the last few years and how long they took to sell. You may be surprised to find zones where deals seem to go to die.
Finding out the root cause of high turnover in a given neighborhood will lead you to your answer as to whether or not you should invest there. Whether it’s a hotbed for pests, crime, traffic or simply has a smattering of bad neighbors, you’ll want to know for sure before signing on the dotted line, and wasting your time trying to flip an undesirable property.
When buying a flip, you have to think about the future in addition to the history of the property. Ask yourself, “Will I be able to sell at a good price, in this neighborhood, in the time frame that I require completing this project?”
Your buyer prospects are vital in distressed property flips because they tend to be in less desirable areas. If you can feel confident about your projected margin, then it’s likely a solid flip.
Remember that a successful flip relies heavily on timing. You’ll have to be on top of all your paperwork more than ever if you want to make a foreclosure, short sale or distressed property deal happen. Keep your finger on the pulse of the local real estate market and you will automatically make better decisions.