Find your fixer in East Hawaii
Are you an HGTV fan? Can't get enough of Flip or Flop? Think you have what it takes to take on a fixer? Let's discuss the first step.
The fun is in the renovation but the profit is in the purchase.
First and foremost, experts all agree that if you are trying to turn a house for profit, the biggest gain is made at the time of purchase. If you pay too much up front, you will have a hard time making up lost ground. Usually that means using bargain basement materials and labor. Trust me, it shows when flippers cut corners. Leave yourself room to do a good job by bargaining hard on the purchase price.
How do you calculate a good purchase price? This is where your real estate professional comes in handy. Imagine your home is finished and looks as good or better than all other options in the area. Now, what would the home sell for in the current market?
[Hint: Ask your REALTOR®]
Take that number and multiply it by 0 .7. We will call this figure A.
Wait! You're not done. The 30% reduction is the built-in profit margin that makes it worth your effort/risk. Now you have to know your stuff to be able to calculate all the costs it will take to make the home pretty again. Maybe you know a contractor who can help you with this. Consider materials, labor, carrying costs like taxes, insurance, mortgage, etc. Be realistic. Got it? Now subtract that total from A.
Fair market price of move-in ready home times 0.7 minus materials = target purchase price
Example: ($350,000 x .7) - $40,000 = $205,000 target purchase price
This is your offering price. Seem crazy? Don't let it scare you. Do have some wiggle room but don't sell yourself short. Flipping a house is hard work and high risk. You don't want to miss out on the reward.
Keep in mind, you may not get someone to take your price every time but if you know what to look for, you may be surprised.
Your best bet is on estate sales where the heirs aren't direct descendants. Foreclosures and bank auctions are good, too. Most allow you to use your real estate agent to help you.
Cash is king. It speaks volumes and gives you way more liberties in choosing your project since banks have criteria that a lot of fixers can't meet.
How to find financing for flippers is a subject for another blog. But it is possible.
Also, a subject for another blog is what to spend your renovation dollars on. Watch this space for more good info.
Whether you are wanting to create a home your way or are looking to fix and flip, there are options in here that could spell instant equity.
Take a look at these great options on the East Side of the island.
cover photo by blackzheep/freedigitalphotos.com