Recent decades have seen an exponential rise in television shows about house flipping. It all seems so easy! And maybe someone close to you has made a short-term profit buying and renovating a property and then reselling it.
We hear a lot less about flips in which the profits do not materialize or there are even losses when the flip doesn’t go as planned. To avoid ending up in this category, here are the 5 most important things you need to know to succeed in real estate flipping.
1. Eliminate conditions at the offer to purchase
In a seller’s market like the one we are in right now (i.e. few offers and lots of demand), high-potential properties disappear from the market in less than a week and often in a situation of multiple offers.
This means that sellers receive multiple offers to purchase and often eliminate those with the most conditions and therefore a higher probability of the transaction failing. They are often willing to accept a lower offer that has no conditions attached.
2. Eliminate financing conditions
Traditional bank pre-approvals are not a confirmation of 100% viable financing. It often happens that after issuing a pre-approval, the bank denies financing for some reason, perhaps because certain expenses were not disclosed by the borrower at their meeting or because the bank discovers that the purpose of the acquisition is for flipping. As a private lender, we can issue a property-specific financing letter that guarantees you financing for the property without any underlying conditions.
3. Eliminate the inspection condition
If you are a seasoned real estate flipper, you probably have a very good knowledge of construction. You can therefore inspect the property yourself at the initial visit or at a second visit before making an offer to purchase. If not, bring your contractor to get an opinion on the building. If you are comfortable with the building, remove the inspection condition.
4. Draw up a budget and don’t overinvest in your property
The most common mistake beginners make in the flipping business is renovating using materials that are of too high a quality given the nature of the building and the area in which it is located. When deciding on the standard of work to be done, look at properties currently for sale and new constructions in the area. They will be your competitors when your house goes on the market. Do not install engineered flooring at $12 per square foot and a $10,000 granite countertop in a $250,000 bungalow! This is not what prospective buyers are looking for and you could end up suffering a loss instead of a profit.
5. Sell with a “superstar” real estate broker
Your strength is finding opportunities and renovating them in order to make a profit. Leave the sale to a real estate broker! They are pros at marketing the property you want to sell. Forget about “old school” real estate agents who still advertise in local newspapers! Choose agents with exceptional visibility on the web, like Gabriel Laflamme, RE/MAX Real Estate Broker, who will invest in your marketing with professional videos and photos. Forget too about platforms like Kijiji, Marketplace and DuProprio because less than 5% of transactions take place there. Plus they never generate enough traction to create multiple bids and overbidding on your property.
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