House Flipping

This is a strategy widely shown on HGTV – buy a ‘fixer-upper’, renovate it, and sell it for a profit.

 

Here is a brief overview of a flip investing strategy:

  

  

 

 

 

 

 

Goals

  • Short term return on investment.
  • Purchase a property that is under the local market value and invest in renovating it, then sell it
  • Proceeds from the sale should cover all costs: purchase, renovation, borrowing, selling, taxes

Tactics 

  • Search for off-market (not on MLS)  deals through real estate agents and wholesalers.
  • Use local comparables to assess how much market uplift potential there is.
  • Build a team of contractors and trades you trust and use them consistently. 
  • Take on renovations that are within your scope of risk and expertise
  • Upgrade to the local market expectations (i.e. don’t build the most expensive house on the block).

Exit Strategy

  • Move Quickly to maximize profit – renovate and sell as soon as the project is completed.

Critical Success Factors

  • Protect profit: Don’t overpay on the purchase.  
  • Know your numbers: keep tight controls on budget and schedule. 
  • Renovate to differentiate from the local area competition.
  • Renovate with features and finishes that appeal to target demographics. 
  • Good team and network: under-market properties are harder to find, especially on MLS.
  • Knowledge of zoning laws that guide what is possible with the property.
  • Local market knowledge of property values, rental rates, and tenant demographics.

Suitable Properties

  • Residential property types: condos, detached and semi-detached houses, duplexes, triplexes, multiplexes. 

Other Considerations

  • When competition for trades is high, keep your team busy by securing their next project without a gap.
  • Financing: there are many financial tools you can use to fund the renovation.
  • Capital expenses: as this is a long-term investment, it would be wise to set aside (allocate) a portion of monthly funds to pay for major improvements such as a new roof, new appliances, HVAC, etc. 
  • Taxes: taxes on rental income 

 

Recommended for:

  • Active investors looking for short term cash profits 
  • Active investors who want to involve themselves in the renovation.
  • Passive financial investors who want to loan funds for renovation and uplift projects at a good interest rate.

 

Is Flipping a strategy for you? 

Contact me to have a conversation about how to get started in real estate investing. 

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