Taking on a fix-and-flip project can be a great way to make a profit in residential real estate. With a smart investment and the right planning, you stand to make a significant profit by flipping a property and selling it. Before you get started with any rehab project, though, there are some things you need to know about staying on-track and sticking with your budget.
Plan Your Rehab Accordingly
Start by planning your fix-and-flip project during the right time of year. In general, the easiest times to sell residential real estate are during the spring and summer. With this in mind, it may make the most sense to tackle your renovations during the fall and winter months.
Set Aside a Contingency Fund
No matter how carefully you plan and budget for your rehab project, there are almost always going to be surprise repairs and other unexpected expenses that arise. The last thing you need is to end up going over your budget as a result. By setting aside a contingency fund that makes up between 15% and 20% of your total renovation budget, you can avoid running out of cash.
Account For “Hidden” Costs
There are a lot of obvious expenses you’ll undertake during any fix-and-flip project. Hiring contractors and buying building supplies are a couple of those given costs. However, there are plenty of less obvious expenses you may end up facing that you won’t want to overlook.
Specifically, be sure to budget for costs related to permits, property taxes, ongoing HOA dues, and closing costs/Realtor commissions once you sell the property. These can quickly add up and affect your bottom line if you don’t plan accordingly.
Don’t Overlook the Location
Location is one of the most important factors prospective buyers look at when buying a home. With this in mind, you’ll want to do plenty of research on the location of a potential property before you buy. While you may spend more money up-front investing in a property that’s located in the middle of a busy city, you’re also likely to get a larger return on your investment than a property in the suburbs.
Always Have a “Plan B”
Any experienced real estate investor will encourage you to have an exit plan in place for any project. While it may not be fun to think about, it’s important to plan for a “worst-case scenario.” For example, what will you do if your flipped property doesn’t sell within a few months of being on the market? Perhaps it will be necessary to rent out the property to begin bringing in income and try selling again when the market is looking more promising.
Borrow Responsibly
No matter what your plan is for fixing and flipping a property, borrowing from a reputable lender that you can trust is vital. Looking for a hard money loan for an Arizona real estate property? Hard Money Lenders AZ has you covered! Contact us today at (480) 576-5788 to find out more about our borrowing options, especially as they pertain to our excellent rehab and fix-and-flip loans.
