In recent years, to invest in the fix and flip business is a great choice to get better ROI with your investment dollars. Like other investments, this also involves some risk factors. Here, the reward comes through purchasing a property that has a higher potential value as compared to its current market value. Repairs, renovations, or restorations are needed in order to obtain the highest possible price for future sale. Risk arises if the property is bought for too much, or there are repairs greater than anticipated.
How to minimize the risk in fix and flip?
Managing risk is necessary for any business to get succeed. In a fix and flip business, it is possible by becoming aware of the real estate condition of the area in which the property is located. You should also take note of the history, potential factors, and future factors incorporated in the area and the property itself. If you find favorable factors of both the location and the property, the wisest thing to do is obtain an official appraisal of the current value of the property prior to making the purchase. Make sure you are also aware of the reasons behind the low value of the property as well as the repairs or changes needed to increase its value.
Do it by yourself to save the cost:
If you really want to decrease the cost of investment then do most of the renovations by yourself. If you want, you can hire crews for renovation but assume higher repairs costs. The property should be reappraised as soon as everything has been renovated, repaired, or reconstructed.
Calculation and Formula that suit your investment preferences:
Step 1: Determine the value of the property you are interested in after the repairs, renovations, or restorations have been done. For this you can get help from reliable appraisers or search for similar properties that have been sold in public records to get comparable prices.
Step2: Calculate the total cost including the costs of purchase, property preparations, repairs, property taxes and fees, closing fees, insurance of homeowners, loan fees, title policy, sales commission, and loans interests among others.
Boom with marketing strategy:
Marketing is an important phase to get the right value of your investment. Utilize different ways of advertisement with both prelaunch and launch steps. You must have a sound strategy on how you will be able to flip the property that you have just fixed, or your ROI will suffer.