By Noah Brocious – President/RI/Mortgage Loan Originator – So you’ve researched loans for investors and are ready to jump into the Arizona fix and flip marketplace. Where do you start?

The first step of rehabbing a property for profit is finding the right house. This is especially important if you’re new to the game, as you’ll be taking on quite a risk, and you need to make sure it pays off. You want to avoid any mistakes that could set you back and end your real estate investment career before it gets off the ground.
Fortunately, there are a lot of tried-and-true ways to find the perfect property for your first rehab. Here are some of the top tips.

Don’t Be Afraid To Go for a Property

If you know a property will work for you, don’t be afraid to make an offer. Even if you don’t think it’ll be accepted, you should still make an effort.
Why? The truth is, you don’t know what’s going on behind the scenes. For example, the sellers may be looking for a quick closing and are willing to take a lower offer if it means you’ll take the property off their hands. Additionally, an initial offer can lead to a counter, and you may be able to negotiate to lower than the asking price.

Create a Budget

Before you start looking at property, you should know how much you have to spend. Being informed about your finances ensures that you don’t get in over your head. Remember that flipping houses includes several costs:

  • Purchasing property
  • Closing costs
  • Taxes and insurance
  • Labor
  • Materials

As you create your budget, make sure you take each of these categories into account. Additionally, you should include a cushion for renovations, as you may run into unexpected expenses during the rehab process.

Track the Market

The market will have a significant impact on what you can afford. The critical thing to remember is that the market shifts, which means if it’s not in your favor right now, you can always wait for things to change. It’s better to hold off on making an investment than taking a significant risk and ending up with a home you can’t sell.

Look for Affordable Housing

While it may be tempting to create luxury housing, the truth is that you may have trouble selling a mansion. According to economic trends, affordable housing is in great demand.
For some places, this means changing your focus from single-family, unattached housing to condos and townhouses. Whether you’re looking for property in West Texas or Colorado, make sure to identify affordable options to appeal to more buyers.

Research the Neighborhood

Once you’ve found a suitable property, do some research on the neighborhood. Check out what the homes currently on the market are going for and the typical size and layout. You want to keep within range of what the neighborhood has to offer.
Why is this important? While it’s good to have your property stand out in some respects when seeking a buyer, people have certain expectations about neighborhood conformity when buying a house. For example, people looking for six-bedroom homes aren’t going to look at a neighborhood where most homes only have three bedrooms.

Find an Agent

One of the best things you can do when conducting your property search is to hire a real estate agent. For one, it relieves a lot of the researching burden, which means you can spend more time actually considering each possibility rather than looking for options. Another benefit is access to a network of other buyers, sellers, and agents. You may be able to jump on a great deal because your agent knows of a house that is just about to go on the market, giving you a head start on other buyers.

Check Out Auctions

When lenders foreclose on houses, they try to make back their money by selling them at auctions. As you might expect, these homes sell for well below the market price.

To save money on purchasing, you should research auctions in your area. You typically have to register for these before they’re held and prove that you have adequate funds to pay upon winning. Fortunately, investment loans can help with the second requirement, allowing you to immediately take possession of property instead of having to deal with a drawn-out closing process.

If you can’t attend an auction yourself, plenty of companies offer representatives to do so for you. As specified by you, these representatives are given bidding instructions, then act on your behalf at the actual auction.

Get a Second Opinion

While it may be more convenient to attend showings on your own, it’s best to bring along another set of eyes. Try to see property with your agent to ensure all your bases are covered; an agent may see red flags that you miss.

It also doesn’t hurt to have someone play devil’s advocate. For example, if you’re impressed with a place, your agent can bring up the hard questions:

  • Will you be able to afford it?
  • Is this in a sellable location?
  • Are there large-scale repairs that need to be done?

Have a Plan Before You Buy

Remember that to profit from flipping a house, you need to increase the property’s value during renovations. To ensure you can do so, you should look at each home with an eye to the future.
It’s not enough to simply buy a house and hope for the best — you need to have rehab plans before you make an offer. Is turning the living room and kitchen into an open concept area feasible? Is there room to add a second bathroom? These are just some of the questions to keep in mind as you look.

If you already have a contractor, you should bring him or her when viewing a house. Contractors understand building code and costs, which means they can veto a property that can’t be rehabbed into a profitable home.

Don’t Take on More Than You Can Handle

It may be tempting to look for the cheapest property, but it’s essential to think about the labor, materials, and time required to turn it into a profitable investment. A dilapidated property will take a great deal of resources to get into shape; even if you save money on the purchasing, you may run into significant issues that eat up your funding.

Have Funds Ready

Finally, you should have funding before you make an offer. Not only does this mean a faster closing process, but it can also give you an advantage during negotiations. For example, sellers might be willing to accept a lower offer if it means cash in hand.

Are you looking for fix and flip loans? Capital Fund 1 can help. As a private lender, we’re happy to provide fast, reliable financing to investors in Arizona, West Texas, Colorado, and Oregon. For more information or to start your application, go online, or give us a call at (480) 889-6100.

_____
Photo Credit: Andrey_Popov

Leave a Reply