It is important to assess your real-estate flipping activities before you take action to ensure success. In this blog, we will share some tips and tricks to make certain that you are on the right path to a profitable investment flip.
1. You must understand your lending terms.
If you obtain a hard money loan to fund the flip, often times these loans require interest only payments while the loan is outstanding. For example, if you take out a loan for $100,000 for 10-months at an interest rate of 10%, you would pay $1,000 a month in interest. At the end of the 10 months, you would be expected to pay the loan, and hopefully this would come by way of you selling the property. Since you’ll be making interest only payments and continue to owe the principal amount of the loan, you must budget and plan for this in your overall strategy.
In terms of monthly interest costs, make sure you shop around for the best rate and the most generous terms, so that you have time to complete your renovations and sell your property. Be sure to have another option of getting out of your loan, if you are unable to sell the property within the lender’s time frame.
2. Have a solid construction plan and budget.
Successful flippers budget for making improvements on the property and seek ways to cut down their carrying costs. To do this, you should consider the following:
- Have a qualified construction manager and team
- Have a qualified real-estate agent who can estimate time to sell the property
- Work with a qualified CPA for tax planning for your flip
3. Have a great agent!
When choosing a real-estate agent, make sure that they are ready to list the property as soon as you have finished all of the improvements. As mentioned before, you want to make sure that you are selling the property within the lender’s time frame if you are obtaining a hard money loan from the bank to help you with your flip.
4. Assess the current real-estate market.
This coincides with having a great agent. Your real-estate agent should be able to estimate how long it has taken for properties to sell in your area, as well as other deciding factors that may influence purchasing decisions. It is important to assess the current real-estate market before you buy the property.
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