Aviva is the Managing Broker of Sonenreich & Co, a third-generation commercial real estate broker, owner and investor in Denver, Colorado.
Want to make great money and be your own boss? Consider flipping residential or commercial real estate. Flipping houses or commercial properties can be very rewarding both emotionally and financially. Of course, with the reward comes risk, and it is always wise to be careful to prevent chances of a loss. The following 10 tips can help you maximize your profits when flipping property.
1. Study the local market before making a purchase.
It is very important to have a detailed understanding of the local market in order to be successful in real estate. Study local rules and regulations. Know what local governments require, and invest time in understanding the key factors that impact the local real estate prices.
2. Choose the right neighborhood.
Choosing the right neighborhood can make all the difference. You may wind up getting the best house in the worst neighborhood and be stuck with it for longer than you’d planned for. At the same time, you may have the option of buying a terrible property in a great neighborhood and end up with a great return. Always make sure to purchase in the right neighborhood for flipping.
3. Select properties that can be updated quickly.
Time is money in real estate. Every day and every dollar counts. Generally, I don’t recommend flipping properties that require work beyond your means. You may end up getting your capital stuck and miss out on other lucrative opportunities. Go for the properties that can be updated quickly.
4. Make the right improvements.
When you go about improving a newly purchased property, it is important to know which improvements to make. Making unnecessary improvements can be a significant value loss to your property. At the same time, missing out on necessary improvements could result in the undervaluation of your property. Try incorporating efficient technologies in heating, ventilation, air conditioning, electrical and plumbing. These will increase the value of your property.
5. Price down, negotiate up.
Successful real estate entrepreneurs know the importance of negotiating sales and purchases. A good rule is to always price down when placing an offer and try to bring the buyer close to your offer. Similarly, always negotiate up when making a sale. Play on the strong points of your property, and do your best to negotiate the buyers into paying your desired price.
6. Buy houses or commercial property with solid foundations but undesirable features.
Never buy houses or commercial properties that have major foundation problems. Remember that your objective is to flip the property. You don’t want to end up spending months trying to fix the foundation of a property. On the other hand, it is fine to buy a property that has solid foundations but undesirable features like bad interior design or broken windows or doors. These things can be fixed within a few days.
7. Focus on paint, hardware and lighting.
It is important to present the property in a desirable condition to prospective buyers. Make sure that the walls have a fresh coat of paint, the hardware is not too dated and lighting works properly.
8. Understand your finance options.
Spend time understanding your finance options. Are you buying your property with cash? Will you apply for financing through a lender? Understand the ins and outs of your finance options before choosing one.
9. Network with potential buyers.
It is always better to network with potential buyers and understand their demands before entering the business. Do everything possible to build relationships with prospective buyers and investors. Some of the most successful real estate investors have buyers lined up long before they update their properties. Building a strong network is critical to your success in the real estate business.
10. Be patient and wait for the right offers.
Many enter the market, purchase property and panic when unable to sell for top dollar. If you buy into real estate you must be able to wait out the hard times. If you buy, flip and find a lack of interest, don’t panic and sell in fear of making a loss. Property prices fluctuate. Wait for the high tide, and lease until then if you can.
Like any endeavor, the benefits of flipping real estate come with a side of risk. To maximize your earning potential and mitigate your chances of financial loss, be sure to take these actions with every property you flip.