I love it when agents and brokers send me new potential flip opportunities. The face is brightened, the adrenaline tingles run around me, and the image of rich grandeur comes to my mind.what morning Am I going to do it for all that benefit? !! Emails usually contain some exclamation marks that indicate the immediacy I need to act on.
“”The seller needs to get rid of the house, but today I need a full cash offer !!!!My expectations are high – another sip of coffee to boost the excitement!
Get to the part where your email address is listed, quickly create a new tab in your browser, search for this great deal in Redfin, plug it in and quickly check your land. Usually I need to double-take and double-check what the price of a house is. The seller is not looking beyond the market value of this house! Did you think they were suffering? !! Did this agent do due diligence, or did you just dismiss it to me in search of quick money? Maybe I’m missing something …
In reality, most of the houses I see aren’t worth turning over. Still, it runs the same process every time I see the agent’s email. The excitement is half the fun, but most of the deals I see aren’t worth my time, so I need to relieve it. In a booming real estate market, it is particularly difficult to take over marginal transactions, but it is important to recognize that the market is cyclical and this time as well.
Through many trials (and many errors), I have developed six criteria that can remove the topic from the hyped flip opportunities and still pass the good ones. I don’t think my standards are the only ones worth it. It’s far away from it. It’s important to have the foundation, process, or chill time to cool the potential flip enthusiasm before making an economic investment decision. This is mine.
6 Criteria for Finding a Reversing Profitable Home
1. Comfortable basement selling price
The natural thing to do when taking on a flip is to look at the top comp. “”Oh, the property over there sells for $ 800,000, and the target property is only 500 square feet smaller, so I’m sure it will sell for $ 795,000!Believe me, I always do this, and I know a little comp-sterbation can be fun. The problem is that you need to be prepared for the worst scenario. Is there a comp right next to a $ 800,000 home that just sold for $ 550,000, and if you review it further, is it really quite similar to the subject?
Yes i know, your flip is Sooooo Much better than the one sold for $ 550,000! “that too Similar,You may tell me! Or maybe it is. Anyway, the $ 550,000 Comp shows a comfortable underground selling price for Flip. I’m not saying it sells for $ 550,000, but if things go wrong, you should be confident that your home will sell at least that much.
This is not necessarily a trading killer. This is especially true if you are buying the target home for around $ 300,000. However, you will need to resell more than $ 550,000 to configure the transaction or make the transaction work. Yes, it may be good, but in the worst case, you can make $ 550,000 in this transaction.
2. Possibility of “pop”
Now that all the comfortable basement numbers have been set, let’s see if there is a possibility of a big rise. (Note: There is a reason why the comfortable underground selling price comes before this.)
That $ 800,000 comp is definitely good for your subject assets. Even better, there are two others in the $ 700,000 range. Talking to some of the more savvy realtors, they told me how some of the higher selling prices came about. Often in low-stock areas, homes are listed well below the market, buyers are coming in and putting highs of hundreds of thousands of dollars on everyone else. Yes, it’s a comp, but it’s also a unique buyer. This often happens in Silicon Valley where I flip, and it makes underwriting difficult.
This means it’s important to see the story about the potential reversal of “pop.” Was it listed for $ 775,000, put on hold for two weeks, and then sold for $ 800,000? This is, in my opinion, a significantly better comp than the house initially listed for $ 600,000. Again, with some home sales in the $ 700,000 range, the deal looks really sweet and can help raise the “comfortable basement selling price”.
3. Price range close to the median of the city or region
Are you going to build the nicest and largest house this neighborhood has ever seen? !! If so, at least in my opinion, you are more likely to lose money. How many people can afford the absolutely great and most expensive homes in the area? A few. What if they aren’t on the market for new homes, or just don’t want to overuse? Your flip can sit down.
It feels like a broken recorder, but this isn’t a big deal as the market is up as it is now. However, when things get cold, problems can occur. The solution is to target properties that will be resold at prices close to the median price range of the city or region. How many buyers are there in the pool? majority. It’s a stochastic play. The point is to aim for a market segment with a large pool of buyers. If your home is really the best, maybe you’ll hit a little in a bid war.
4. Clarify the value-added story
The first thing the agent asks when he sends us the possibility of a flip is “What’s the story of the house?” To be honest, what I’m really looking for is a sign of pain. “The house was inherited, but no one lived for several years and the roof was severely damaged. They need cash, so they’re just trying to sell it right away.” It will be a good story as it shows how you can add value and why homes are sold at discounted prices.
Most importantly, I want to see how I can add value to a property to make money with flips. It could be a feature that finishes quickly in cash, intensive refurbishment, or add-on / rebuild scenarios. All of these options have barriers to entry that can be overcome and explain why I’m getting a good deal.
I’m wary of buying a house that seems to be stealing at a good price. Don’t get me wrong. Sure, it’s okay to buy a home for a high price, but I want to be able to rationalize why I’m getting a good deal. With the proliferation of real estate technology, most people need to have an idea of the value of their home (perhaps even a bloated idea). If you tell yourself why it’s profitable, I think it’s easier to buy a house.
5. Normal layout
This is one of the most overlooked aspects of the house for potential flippers. Layout is important. I’m dealing with many homes built in the 1950s and there are some weird additions. The proverbial “lipstick on a pig” approach can be a loser. To make matters worse, the Winchester Mansion look-alike doesn’t have a simple fix. A house with a leaking roof is bad, but at least there is a reasonable price to repair it. Of course, a badly laid out house is irreparable unless you knock down the whole house.
I understand that the term “normal layout” is subjective and a bit vague. The test I use when walking home is to see if I can plan the floor plan in my head. It’s relatively easy to do, so I feel like the layout is good. Another trick to use is to bring a woman to every gentleman. Because women understand these things much better than most men.
6. Nice surrounding house
This is real estate 101, but it’s easy to forget. Are you buying the best home or the worst home in the block? Other homes nearby don’t have to be brand new reconstructions, but if you take a little pride in ownership, it makes a big difference. More importantly, you want to stay away from homes that look bad or have problems with their owners.
Walk around the neighborhood at several different times of the day and talk to people outside. It may be a little annoying, but to be honest, tell me what you are doing. Most people are willing to share a little dirt in their neighborhood.
What do you look for when you turn the house over? What is your process? What are your criteria?
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