Flipping Houses 101 – Finding a Property

Once you’ve made the initial decision to start buying property to rehab, your homework officially begins. 

In our previous blog, we discussed the basics, which included developing a plan and gathering all of the information needed to form the right team to turn your vision into a reality. Now it’s time to begin the property search.

Sounds fairly simple, but it’s actually a bit more detailed than you might think. A lot goes into the process. To help you get started, we’ve broken out below four main points to keep top of mind as you get started.

What Makes the Best Markets?

One of the most important decisions you’re going to be faced with is, where do you want to buy? When thinking about this question, consider the best places with desirable locations. There are great opportunities all over, you just need to know what you should be looking for.

Do you remember the common expression, location, location location? It is everything!  Focus your search towards popular areas where there is a demand for the type of property you’re looking to rehab as well as an area with foreseeable growth. This is when a local real estate agent is going to prove to be an invaluable resource. 

As you narrow down potential properties, keep an eye on similar listings in the area to see how long they’ve been on the market, current asking price, along with any price reductions. If it doesn’t look like many homes are selling in the location you’re looking in, it might be a good idea to consider a different area to make the deal more profitable for you.

Something else to think about is the material and personnel cost. What is it going to cost you personally to flip a house in your target market? In addition to the cost of just about everything going up, things cost even more in larger cities, like New York City, than they do in other places. The more robust the local economy is, the higher the average cost of things will be. On the flip side, the price of real estate will be higher in the more expensive markets. 

You’ll also want to keep an eye out for a catalyst, something that affects the market. In smaller cities, things are different than they are in larger, more populated areas but there are catalysts regardless of size. 

Things like crime rates, schools, and even new businesses, are all important factors to take into consideration when assessing what will bring value to a neighborhood. Look for the areas that are up and coming because by the time all the improvements and additions are made to a neighborhood, it’s likely too late to maximize your profit potential. 

Local taxes are another factor to consider when looking at different areas since they can have an effect on the pricing and salability of a house. Higher real estate taxes can impact a potential buyer’s ability to afford the home. In addition, until you flip the property, you will be the one paying these taxes as well. 

Choosing the Best Type of Investment Property 

Are you looking to buy a single family home, or maybe something a bit larger, like a multi-family. Along with deciding on the type of home, you’ll need to be clear on whether you’re going to flip it, or possibly rent it. The best way to make this decision is to look at your financial goals; flipping a home brings a single score while renting will generate income over a long period of time. 

How to Find Houses to Flip 

After you’ve studied the market, narrowed down the area, and decided upon the type of property to invest in, it’s time to physically start the search. In our first post on flipping homes, we gently touched upon some of the ways in which to go about this. 

In case you missed it, let’s review.

Get a real estate agent – Especially if you’re unfamiliar with the area, having a local real estate agent as part of your team is important. They know the best places to look, and can help weed out the properties that aren’t a match. Not to mention they are filled with knowledge and advice regarding the market as a whole. 

Look for auctions – If you have the ability to pay cash, private auctions might be something to consider. Foreclosure auctions are often published by the county several weeks before they hit the auction block giving you the opportunity to check out the properties prior to their sale date. Keep in mind that it’s highly unlikely that you’ll be able to go inside the home, or even on the property itself. 

While these types of opportunities can be good, they also carry risk. Most auctioneers require a 10% deposit of the purchase price put down at the time of the winning bid with the remainder to be paid within 30 days, otherwise you lose the deposit. This is why these types of deals work best for cash buyers. It’s difficult to finance auction purchases because lenders want appraisals and often a walk through before closing. 

Digital Classifieds and Online Sites

Do you remember the days when you would open up the classifieds and look at property listings?  These days all you have to do is turn on the computer, do a quick search, and sites like Zillow, Trulia, and Redfin (to name a few) will be able to provide hundreds of listings. Craigslist is another platform to search for property listings. 

How to Choose a House to Flip 

We’ve covered how to find a property, now let’s focus on how to choose the right one. 

First, look at the location and conduct the same type of research your potential buyers will do. If a couple with young children are looking at the property, then the school district becomes important. If the area is predominantly filled with young, single people, the focu of importance changes slightly.. 

Things such as easy access to public transportation, shopping, restaurants, these are factors that weigh into a buyer’s decision as well. Look at the positive attributes as well as negative ones that could have an impact on your ability to flip the property. 

The physical characteristics of a property is another area to focus on. You’re going to want to make the property stand out yet you will also want it to conform to what’s around it. 

For instance, if the home is smaller in size compared to other homes in the immediate area, it might sell for less money, but if it’s a home that is much bigger in size compared to others in the area, then it might be viewed as too expensive for the neighborhood. 

You also want to pay close attention to the home’s exterior. Buyers often fall in love with a property at the street, so before they even set foot inside to see all of the wonderful things you’ve done, they may have already formed an opinion. And for some, that drive by is all they need to make up their mind. 

Purchasing, rehabbing, and selling a property is a lot of work, but with knowledge and the right team, it can be a profitable venture.