What Makes A Great House Flip?

What makes a good house flip stand out from the rest?

The latest house flipping data shows returns are strong, but a lot of investors are getting it wrong. The average gross returns on a flip stand at around $60,000, or 50%. However, there are also a significant number of failed flips, likely the result of the ‘reality’ TV epidemic and amateur investors failing to build their knowledge base first. So, what makes a good flip?

Due Diligence

Don’t do anything without due diligence. Some aspiring investors, drunk on television, local bidding wars, and DIY posts from Instagram are winding up selling out for less than they spent, or don’t even know what they really own. Others simply aren’t diversified enough to keep the odds in their favor. You’ve got to know what you are buying, and what the real numbers are, before finalizing any acquisitions.

Interior Design

Houzz, Instagram, Pinterest, and other social sites might be cool, but they aren’t helping new investors stay objective. The best strategy for interior rehab jobs is to create a clean canvas for potential buyers. You must remain neutral and allow the next buyer to envision what they can do with the space. You’d be surprised at just how much of a massive negative impact simply the wrong color carpet can have. Do include nice feature touches to create that wow effect, just stay away from going too crazy with color. Balance quality, without over improving. The next buyer is going to appreciate the value and discount more than some Hermes throw pillows which the lender won’t count towards the appraised value of the home.

Exterior Remodeling

Curb appeal is still a big deal. It matters more than ever in our online world. One of the ways this is really showing up is at the front door. Keep things simple elsewhere, but if you can, spring for a custom door that really makes the place pop.

Speed

One of the biggest mistakes being made out there today is speed. Some investors are taking 90 days or 6 months to finish a rehab. That’s crazy. That’s money and profit being flushed away every day. Not to mention missing out on many of the most likely buyers. Unless you are replacing a roof, putting in a pool, or a rebuilding half the home, you should be done far faster than that. Even then, you might consider deferring some of those big, time-consuming projects to the next buyer. The faster you flip, the higher your per deal profit and the more deals you do in a year. Even working one at a time, the investor who does 6 deals per year, is totally crushing it compared to the one who does 2.

Efficiency

Efficiency makes a big difference. Most investors don’t have the volume to obtain the best prices on materials and labor. They don’t have the cash flow to market well and keep the best contractors. Pretty soon, this results in a stark divergence in results. Improve on this area with volume, contractor relationships, and doing multiple deals in the same area which compounds the returns on time, labor, and marketing.

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund

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