House flipping in current market

[Shawn Sopic]

We just went under contract on our first investment property which we plan to flip.  Its a large house in a nice neighborhood in need of some TLC.  We're using an interest only loan with 25% down.  In current market conditions, less buyers have made great opportunities to get good deals - which we got, so we pulled the trigger.  Im just worried about the market in the next 6 months or so once we're done with renovations because obviously we'll need buyers and hope interest rates come down some.  There are some solid comps in the area within the last few months.  Any tips to navigate our first flip and how to maximize our returns in the current market? Thanks!

[Scott E.]

This is a fine market to be flipping in. It's a heck of a lot better than trying to buy a house to flip at the peak ~2 years ago.

Just a few random things to keep in mind (coming from somebody who is actively flipping homes in this market and has been flipping homes for 12 years).

1. You did good picking a nice neighborhood. Location is the most important part.

2. You did good picking a large house. It's typically easier to push values higher on large homes because it only costs $50-$100 to remodel a house, but resale values range from $250-$500/SF (of course this is the case in my area, I'm sure your area is slightly different)

3. If you're planning on this taking 6 months, it's going to take 9. Just plan for that now when thinking about holding costs (loan, taxes, insurance, utilities)

4. Take whatever you are budgeting and add 20% to the number for a contingency 

5. Nobody has a crystal ball, nobody knows where the market will be in 6 months. It is likely that interest rates will be the same or lower than they are today. And historically speaking, real estate appreciation rates suffer during election years. Just a few things to be mindful of.

6. Hire a designer. In this market more than ever, you need to create a product that is going to "WOW" your potential buyers.

7. Make sure you stage before listing. Your home will sell faster and for more money if you stage.