For the savvy flipper, remodeling existing luxury properties and reselling them for a profit can be an excellent investment. According to SRE Investing’s Belson, “It’s faster than building from ground up, but is limited to properties that have just the right combination of architecture, condition and layout,” adding that fixers are better.
While there is huge propensity for profit, there is a potential downside. “Because most of these homes can be lived in at purchase, you will be competing with local buyer-users who can outbid you,” Belson adds. That said, there is much less competition among investors and flippers in the luxury market because not as many people can afford to fund and fully execute high-end projects at a high-level.
In order to be a successful flipper, it is necessary to pay close attention to market trends, decide on and execute the necessary renovations or remodel, and make capital improvements. These all control the price appreciation of the property, and allow the flipper to take a “fixer-upper,” and sell for a profit.
So how do you flip a home? As with any investment, it is best to do your research before committing and risking your money, or that of an investor. Like many other investments, the simple strategy is to buy as low as possible and sell as high as possible. Unlike investments that rely on a buy and hold investment strategy, it is vital that the transaction is completed as quickly as possible, thus limiting the amount of time your capital is at risk.
The quicker and more efficiently you flip your investment property, the more likely you are to maximize your profit. Speed reduces the amounts you will end up spending on miscellaneous costs such as mortgage, utilities, property taxes, insurance, etc. A way to expedite the sell of your property is to list the property below market value (within reason, of course). Being greedy and tagging on a listing price that tries to squeeze every penny out of a sell is likely to reduce your overall profit long-term.
Often times it makes sense for investors to focus on the purchase and subsequent resale of more than one property at a time. These multiple flips allows investors to attempt to generate a steady flow of income by engaging in frequent and/or multiple flips.
Flipping is a serious business that relies on the creation of budgets, conducting adequate research and developing a keen understanding your customers (i.e. the people who will purchase your properties). In addition to keeping a close eye on the ever-changing housing market, your budget, and your time, planning ahead and making smart decisions regarding your renovations and remodels can add value to the property, and considerably affecting your bottom line.
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