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How to Avoid a Bad Fix and Flip Deal

How to Avoid a Bad Fix and Flip Deal

One of the best uses of hard money loan programs is for investing into fix and flip projects. A fix and flip real estate project focuses on rapidly expanding the value of a property through targeted remodeling. By introducing a small but powerful set of remodeling projects, it may be possible to add $20,000 or more to the valuation of a residential structure. Most fix and flip experts focus on single family homes in competitive real estate markets.

Although you can make a great deal of money with fix and flip on real estate in Phoenix, there are some precautions to take into account. It is important to do appropriate research, set an accurate budget and take action as quickly as possible. The longer a project takes, the lower the profit will be.

Let’s take a look at 5 ways to make your fix and flip project more successful in order to get the most from your endeavor.

Maximizing Profit with Real Estate Flipping – Calculate ARV

ARV, or after repair value, helps determine if a property is a worthwhile investment. ARV represents the total home value after all renovations are done. The difference between your as-is property and the ARV is your potential revenue. To measure ARV, look at homes similar in age, size, square footage and room count, ideally within a mile of the target property.

Setting an Accurate Real Estate Flipping Budget

Real estate flipping expenses can grow unexpectedly if you are not careful. To estimate repair costs, it is a good idea to get bids from multiple contractors. If you are planning to perform some renovations yourself, invest time “comparison shopping” for your materials. You should add 10 percent on top of your best budget estimates to account for the unexpected, too.

Determining Closing and Holding Expenses

Closing costs can be quite challenging to estimate in advance. It is not unusual to spend 2 percent to 5 percent of a house’s value for closing. Costs can be reduced by negotiating concessions or managed through favorable financing. To budget accurately, get several estimates for total closing costs. Don’t forget optional but desirable extras such as a home inspection.

Considering Partnership

Partnering with another investor substantially reduces your risk. Although this will inevitably reduce profit, it can be worthwhile. In most markets where fix and flip is taking place, there is a thriving community of real estate investors. Working together can mean success for all instead of costly competition. However, it may reduce margins too greatly on some properties.

Avoiding Weird Houses

Like many forms of investment, real estate flip and fix is a game of averages. Once you have several successes under your belt, you will develop instincts that will help you find “diamond in the rough” properties. Until that time, however, it is best to stick to the more common and better known trends in the area. For example, avoid homes with “weird” floor plans that need substantial revisions.

Contact the Private Money Lender Arizona Trusts for Your Fix and Flip

No matter whether you use real estate in Scottsdale, Phoenix or any other leading Arizona market, the fundamentals of fix and flip remain the same. Achieving your goals begins with the funding you need to acquire a property and begin your work.

To find out more and get started on fix and flip loans, just contact Capital Fund 1 today.

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