House flipping is a popular pastime with real estate investors looking to make significant profits. This investment strategy comes down to the investor looking for properties that are undervalued, acquiring them, renovating them, and then ultimately reselling them for a higher amount than they were purchased for.
In order to become a successful house flipper, the investor will need to know how to sniff out a good property deal. It’s essential to know how to find houses to flip and to take the steps needed to make them profitable sales. Some of the aspects of flipping the investor must be comfortable with will include neighborhood and housing market analysis, budgeting and financing, and a good understanding of how to renovate houses. Finally, they’ll also need to understand how to market and resell the property to an interested buyer as fast as possible.
This is how investors can find houses to flip the right way:
1. Finding A Good Location: Neighborhood Analysis
The difference between a low ROI and high ROI flip will come down to the location of the home. Selecting the right neighborhood is the first, and arguably most crucial, step the investor will need to take.
When evaluating potential neighborhoods, there are a few key characteristics the investor will need to be on the lookout for. The first is to look at the property’s curb appeal. This refers to how attractive the property is from the road. Next, the investor has to consider what the most notable amenities in the neighborhood are – these are what will draw in buyers. For this reason, it’s good to seek out properties that are in residential areas but closer to business districts.
The reason these characteristics are so important is that you can turn the worst property into a stunning and luxurious family home, but if it’s on a bad street the investor will struggle to find buyers.
2. Research Good Deals: Analyze The Housing Market
Once the investor has done their due diligence in finding some good neighborhood options to buy into, the next step is to take a closer look at the housing market’s recent statistics. Next to location, the research done here can be the differentiating factor in buying a property that will sell easily versus stay on the market for months.
The most important components to look at when analyzing the local housing market are to look at comparable properties, how long they spend on the market, and how much they sell for. By evaluating these properties, the investor can set up a more accurate budget and gain a better understanding of what they can expect once the time to list the home comes around.
Comparable properties are homes that have similar characteristics to the one the investor is interested in purchasing. By considering their listing prices and even sales history, it’s possible to gain a better understanding of what a flip in that neighborhood will be valued at and whether it’s a good deal or not. The days these properties spend on the market are also a serious indicator for the investor, highlighting how popular the area is with buyers.
Fewer days spent listed on the market mean the investor will have lower carrying costs to maintain, leading to a higher ROI once the property sale is concluded.
3. Going Beyond Listings: Finding Off-The-Market Deals
Some of the best property deals are never formally listed for sale. With competition for online listings heating up, more investors are looking for ways to find undervalued properties that are off-the-market.
This can be a time-intensive approach to take, but if it pans out the investor gains the major advantage of being an exclusive buyer. Some real estate investors look for off-the-market properties via recommendations from their private network, while others use direct mail to entice property owners into selling their homes.
Real estate wholesalers are another source, where investors can be connected with exclusive property leads through a middle man. Property auctions can be another way to find off-the-market deals, but with the added caveat of not being able to inspect the property for issues beforehand.
There are many different ways for investors to find houses to flip, and there is no reason why they cannot take more than one approach at the same time. When looking for properties with the highest profit margin potential, it’s essential that the investor consider the neighborhood’s benefits, the performance of the housing market in recent months, and extend their search to find off-the-market deals.
Bonus Tip:When you are ready to pull the trigger on your target house, the next challenge will be how to fund your flip. This is where hard money lenders can be very useful. For instance, if you were to find an ideal property to flip in Georgia, it would make sense to use a hard money loan to purchase the property.
While you can also apply for funding with a bank, they can be very strict and very slow when dealing with investment property applications. Hard money loans effectively allow you to circumnavigate these administrative hurdles.