Questions to ask:
1. Is this the most desirable street in the neighbourhood or the most problematic?
2. Is it one of many single-family homes on the street or are you surrounded by multi-family rentals?
3. Is it within the boundaries of the most desirable schools or do you fall a block or two short?
4. How long is the average home sitting on the market before it is sold?
5. What percentage of the asking price are homes being sold for?
6. Is there a neighbourhood price ceiling? If so will your after repair price fall under or above?
3. Identify your end user
One of the biggest mistakes new flippers make is buying the property before identifying their buyer. Your end user should be the person you are buying and designing for. You need to look for the property that will allow you to fill a need in the area you want to be in, and by doing this you can ensure a quick sale time while obtaining maximum sale price.
Questions to ask:
1. Are you looking to sell to an investor? If so you might want to stay away from that 5,000 sq. ft. waterfront property you have your eyes on.
2. Are you targeting the young couple or single professional? If so, what type of finishing are they expecting? What type of property do they desire? Is this the neighbourhood they want to be in?
3. Are you in an area that is seeing a migration of seniors? If so, that three-storey townhouse may not be the one for you.
4. Understand the number
When analyzing a potential flip it is important to understand that there are a lot more numbers (and dollars) to consider beside the price, renovation costs and sales price, including:
1. Monthly mortgage costs
2. Monthly insurance costs
3. Monthly utility costs
4. Cost of borrowing
5. Realtor commissions
6. Legal fees/closing costs
7. Income tax
*Income tax is something that is often overlooked or miscalculated. When an investor purchases a property with the intention of flipping, the profits from the sale are not considered capital gains, this means that the full amount of your profits at the end of the sale is being taxed at your marginal tax rate which could be the one thing that takes you from the black and into the red.
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