Does the thought of taking a broken down property, fixing it, and selling it to a family looking for their dream home excite you?
There are many advantages to a fix and flip real estate business. This includes the unique opportunity to gain satisfaction from revitalizing a property — and a tremendous potential for profit.
That doesn't mean fixing and flipping doesn't come with risks. It does, and the best way to mitigate those risks is to increase your knowledge about the fix and flip process.
That’s exactly what we’ll discuss in this article: how to fix and flip a property step by step the right way, along with additional tools and resources to maximize your profitability.
Let’s get started!
Step 1: Research
As Benjamin Franklin once said, “by failing to prepare, you prepare to fail.”
The first step to a successful fix and flip — as well as any successful real estate deal — is research everything about the market of the community you’re interested in doing a fix and flip to answering any questions you may have about the fix and flip process (you can find answers with proven online education).
Part of this research includes — if you don’t have already — an overall business plan (including a marketing plan) that can keep record of your expectations and the costs as you go through the fix and flip process, that is also helpful for bookkeeping and taxes.
Step 2: Find A Property
Either way, ensure that you examine the factors of a property. Think about and determine:
- the risks with the property
- the benefits of the property
- the location
- it’s after repair value, or ARV
- walk through the property to identify work
Step 3: Obtain Financing
If you have little money, you can still invest in real estate.
How will you pay for the property?
This can be with a traditional mortgage — and being pre-approved for a specific amount — notifying your network of private money lenders that you’re utilizing.
Make sure that you have the loan in place before you agree to buy the property. Not only does this ensure that you have the money ready when you find a property to invest in, but it also dictates that first line of your total investment budget.
Step 4: Create a Scope of Work
The next step is to create a scope of work, which is the roadmap, foundation of your rehab.
The scope of work is the outline of work that your contractors will bid and agree on, and it defines what actually gets done.
As you’re doing the scope of work and deciding what you will fix, ask yourself 4 important question:
- Will it add value?
- Will it help sell?
- Is it cost effective?
- Is it needed?
Step 5: Find the Right Contractor
Next, it’s important to find the right contractor.
Simply put, don’t settle for the contractor who offers the lowest bid. Find one that you think will do exactly what is being asked.
If you don’t have experience with contractors, you can find them utilizing:
- Better business Bureau
- Angie’s list
In this step, you also need to decide who is going to manage the project. That can be you, because after all, you know which work needs to be done.
Also, ensure you have necessary permits before you begin renovation.
Step 5: Renovating the Property
The biggest hurdle with this step is not going over your budget.
During this phase, you can choose to be active or hands off.
While you should work with a designer who will create the plan for the look and layout of the investment property, the actual contracting work should be left to the professionals.
Keep an eye on progress because every day that goes by is a day you aren’t making money on your fix and flip property, so you should stay updated on the contractor’s progress while letting them do their jobs.
The most important aspect of this step is to ensure that the progress stays on time and does not go over budget.
Step 6: Stage & Sell The Property
After the contractor has finished work and the renovations are complete, the next item is to put the house on the market — but to entice buyers, you need to stage the home.
It’s important to have it cleaned, and utilize a stager.
Remember: photos from a smart phone don’t compare to high quality and professional images.
The end all goal of a fix and flip is selling a property for a profit.
This positive return on your fix and flip investment ensures that you are in a position to purchase another property once the first one sells.
Allow your real estate agent to market the property and bring you offers from potential buyers.
Once you’ve found an offer that works for you, it’s time to debrief and repeat the process.
Step 7: Repeat the Process
After you complete a fix and flip, it’s important to take a moment to reflect on the process before you repeat the process.
What did you enjoy about the process, and what did you least enjoy? Finding answers to this question can help you decide on your next flip which aspects you should be more hands on, and which aspects you should be less hands on.
What are some aspects you didn’t expect to experience? Noting this can help you be prepared in your next flip for what you were previously unprepared for.
What can you improve upon? There’s always room for improvement, and finding ways to improve can increase your profitability in future real estate deals.
The network of professionals that you create on your first property can be a valuable part of the process on your next investment.
How To Fix and Flip a Property
If you decide to do another fix and flip, start again at step 1.