Television reality shows, like Flip This House, give a skewed impression of the reality of flipping a house. Unfortunately, many new investors jump right in, believing they will make those big paydays. They often end up disappointed and taking huge losses. While every house won’t sell for as much as reality television implies, there is still money to be made, if you act wisely.
How Much of a Profit Can You Really Expect?
It’s difficult to give an accurate estimate because the only way to measure this is by looking at all home sales. The sales in a given region within a specified time frame provide the general home sale price for properties in that area. For instance, ATTOM reports that housing sales averaged $65,520 in the second quarter of this year, but that number doesn’t differentiate between fix and flip investments and other residential sales.
When going directly to investors for information, it’s estimated that they make an average of $30,000 on each fix and flip. This is acknowledging that some investments may bring in less, while others may bring in more. It depends on the overall value of the home, the resources invested in its renovation, and the health of the market in that area.
When going directly to investors for information, it’s estimated that they make an average of $30,000 on each fix and flip. This is acknowledging that some investments may bring in less, while others may bring in more. It depends on the overall value of the home, the resources invested in its renovation, and the health of the market in that area.
How Can You Maximize Your Potential Profits?
While you may not be able to do much about the health of the market, you can act to affect the home’s value by renovating wisely. The real trick is to spend as little as possible on repairing the property and getting it back on the market quickly. As a general rule, the more time you spend fixing up a property, the bigger the chance that something major will eat up your resources.
One thing to keep in mind is not to update features that won’t boost the home’s resale value. When a buyer is interested in the property, their lender will send an appraiser out to inspect the property. If the appraiser doesn’t agree with your estimate of the home’s value, you’ll likely lose money on those upgrades. It’s a good idea to consult a realtor, or a private appraiser, for insight into the upgrades you want to make.
Overall, you will want to keep upgrades simple and cost-effective. Bear in mind that major upgrades may not appeal to homebuyers, who will likely remodel to add their own style, anyway. Look for properties that can be made sale-ready with just some simple and relatively cheap improvements to maximize your return on investment.
