Binge-watching HGTV doesn’t count! Invest the time to study your local market and conditions. By fully understanding the industry, you’ll set yourself up to succeed.

• Target optimal locations and search for foreclosed homes using online tools like foreclosure.com or Zillow.
• Visit homes to better understand potential issues – don’t purchase a home without first seeing it in-person!
• Learn the average price of common projects, like recarpeting, landscaping, or building a deck. Every project is different, of course, but estimating costs will give you a better understand of whether a project fits your budget.
• You’ll also have a more clear view of what you should do yourself, and what you’ll have to hire out.
  Understand what projects increase a home’s value and what can be done quickly.

• Follow the 70% rule, which will help you understand how much house you can afford and how much you can lose on a deal. The rule recommends that investors pay no more than 70% of the after repair value of a property, minus the cost of the repairs needed.
• Don’t forget to network. Talk to potential buyers and start to build relationships with them before you even look for your house to flip. Reach out to contractors and other rehab professionals you’d like to work with. Consider finding a mentor as well, if you know someone who is successfully flipping. You could even offer a financial incentive where you give them a small percentage of your first flip.

This is nothing new but we can’t stress it enough: Location is so, so important. For the fastest and highest returns, we recommend you find a home in a great neighborhood or in a neighborhood that is on the up-and-up. It doesn’t matter how incredible your remodeled house is if the neighborhood is unsafe or undesirable. We recommend you:

• Research neighbors in the areas you’re interested in.
• Find rising real estate sales in areas where there aren’t too many homes for sale.
• Consider employment growth and research if a sizeable employer has moved into the area or has experienced new success.
• Look at public transportation and see if new routes and lines are in the works. For example, Milwaukie, Oregon experienced increased real estate prices after a new MAX light rail line opened.
• Don’t forget to look at school districts, too. Homes in good school districts will always sell faster. Tools like GreatSchools can provide useful insight.
• Finally, make sure to research neighborhood safety. High-crime areas will always be a tough sell, so use crime-mapping services to better understand the neighborhood.

Depending on your level of experience and your renovation budget, you might want to seek property that is in good, sound condition. Unpleasant surprises like black mold or foundation issues can wreck a budget. If you won’t have the opportunity to hire a home inspector, learn about building, electric, and plumbing on your own (or network to find someone who can help you!). Avoid houses with mold or cracked foundations and focus on homes that need cosmetic updates.

Don’t get sunk in credit card debt! Many first-time flippers run into problems when they buy without a large enough down payment and then rely on credit cards for renovations. Taking on debt for a purchase adds months of interest payments, increasing the amount a house will have to sell for in order for the project to break even. This is especially important if you run into unexpected issues during renovations. Experts generally recommend adding 20% to the total of any project’s cost. Don’t forget to factor in other costs, such as building permits, which can cost up to several thousand dollars depending on local ordinances and the specific work.

Questions? Seeking a lender for your flip? AIC is always seeking quality loan requests. Contact us today!