Even the smallest of oversights in this strategy can turn a project from a $50,000 profit into a $50,000 hole. When evaluating a profit, there are a number of factors that should be considered from purchase price to cost of repairs. Such an analysis will help you determine whether you have uncovered a diamond or a dud.
1. What are you buying?
You will need to determine what level of work you want to be involved in. A flip can be as simple as buying a house that needs new carpets and a fresh coat of paint, and can be as complex as a home that needs to be stripped to the studs and reconfigured.
Questions to ask:
1. How much time do you have to dedicate to the project?
2. Who will do the work (you, your bother, contractor, etc.)?
3. What type of property do you want (single-family, multi-family)?
4. Is there a demand for a specific type of property in your market?
5. What is the minimum amount you need to net from a project?
When you know what it is you are looking for, you will be viewing potential properties with laser focus and will be able to quickly turn away from the property that will take you off your track.
2. Understand the market
When looking for a fix-and-flip property, it is critical for an investor to understand their market inside and out. This property is one that you intend on flipping in a short period of time for a profit so there are a few key factors to consider before you make the buy.
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With reality television shows and famous celebrities highlighting the rewards of “flipping” property, more and more Canadian investors are on the hunt for these diamonds in the rough. Although theoretically the buy-fix-flip strategy is one that appears to provide the greatest returns in the shortest period of time, there are many factors that a landlord needs to consider before jumping in.